Tornado cash deposits rise to $1.9 billion by 2024 despite sanctions
Main points:
Tornado Cash is seen growing again in 2024, with $1.9 billion in deposits in the first half of the year. This increase comes despite US sanctions and the founders' legal issues. Hackers continue to use Tornado Cash to disguise stolen funds from various crypto exploits. WazirX, an Indian crypto exchange recently suffered a $235 million breach related to Tornado Cash. The US Treasury considers crypto mixers a national security threat, but some in the industry are challenging some of the sanctions.
Tornado Cash, a cryptocurrency mixing service, has experienced significant resurgence in 2024 despite ongoing sanctions and legal challenges.
According to data from Flipside Crypto, the platform received about $1.9 billion in deposits in the first six months of the year. This represents a 50% increase compared to total 2023 deposits.
The Office of Foreign Assets Control (OFAC) seized Tornado Cash in 2015. In August 2022, the North Korean hacking group imposed sanctions after discovering that Alazar had used it to launder nearly $455 million in stolen funds.
These sanctions mean that any wallet connected to Tornado Cash can be placed on a blacklist, making it difficult to withdraw funds from legitimate crypto exchanges.
Despite these limitations, Tornado Cash remains popular with hackers looking to hide stolen cryptocurrencies.
According to recent data from blockchain analytics firm Arkham Intelligence, the hacker behind the $100 million Poloniex currency exploit has transferred $76 million to Tornado Cash since May. Similarly, the hackers responsible for the HECO Bridge and Orbit Chain exploits moved $166 million and $48 million through the mixer, respectively, in the first half of 2024.
The continued use of Tornado Cash hackers was highlighted by an incident involving an Indian crypto exchange called WazirX.
On July 18, 2024, WazirX reported a security breach that cost $235 million. One of the wallet addresses linked to this hack was backed by Tornado Cash, further revealing the mixer's role in cryptocurrency-related crimes.
The crypto industry has been challenging Tornado Cash's sanctions in 2022.
Supporters say the ban is “unlawful and unconstitutional” because Tornado Cash is not a state or “legal entity” and that banning it violates free speech rights under the United States Constitution.
Major crypto organizations like Coinbase and advocacy groups like The Blockchain Association and CoinCenter have backed this charge.
However, the U.S. Treasury has said that cryptocurrency exchanges pose a threat to national security, and that Tornado Cash does not have adequate controls to prevent money laundering.
This position has caused legal problems for the platform's co-founders. Alexei Persev was sentenced to more than five years in prison in the Netherlands for money laundering. Roman Storm was arrested in the United States and pleaded not guilty to the same charges, but Roman Semenov was arrested.
The resurgence of Tornado Cash highlights the ongoing challenges in regulating decentralized finance (DeFi) platforms. While US authorities are cracking down on crypto-related crimes, the decentralized nature of protocols like Tornado Cash makes effective policing difficult.
