Tornado Cash has seen a $1.9B resurgence this year despite sanctions.
Banned crypto mixer Tornado Cash has seen a surprising amount of deposits in the first half of 2024, despite ongoing sanctions and legal battles for its founding team.
According to data from Flipside Crypto, Tornado Cash received $1.9 billion in deposits in the first six months, which is 50% higher than the total number of deposits in 2023.
The Office of Foreign Assets Control (OFAC) officially sanctioned Tornado Cash in August 2022 after it was revealed that North Korean hacking consortium Lazar Group used the protocol to launder nearly $455 million in illicit funds.
The OFAC sanction means that anyone associated with the protocol will be “blacklisted” – preventing their wallets from being accepted by legitimate crypto exchanges.
In short, any wallet that interacts with the protocol will find it very difficult to withdraw that crypto to fiat from OFAC-compliant centralized exchanges.
Despite these sanctions, the hybrid service remains a popular destination for large hacking groups seeking to disrupt the flow of ill-gotten gains.
According to data from blockchain analytics firm Arkham Intelligence, the hacker behind the $100 million Poloniex currency exploit has transferred $76 million into the mix since May.
In addition, the malicious entities behind the HECO Bridge and Orbit Chain exploits transferred $166 million and $48 million respectively to the mixer during the half year.
More recently, one of the verified wallet addresses used in the July 18 hack of Indian crypto exchange WazirX for $235 million was funded by Tornado Cash.
A number of figures from the crypto industry have been challenging Tornado Cash's bans, with a follow-up lawsuit originally filed in 2022.
The plaintiffs argued that Tornado Cash's ban was “illegal and unconstitutional” because the anonymous mixing service cannot be viewed as a state or a “legal entity” and that banning it would violate free speech rights under the United States Constitution.
RELATED: Tornado cashier Alexey Persev denied bail while preparing appeal.
The lawsuit has since been backed by several large crypto firms, including Coinbase, and crypto advocacy groups The Blockchain Association and CoinCenter, which say the sanctions are illegal.
But the U.S. Treasury says crypto-mixers are a national security threat and has repeatedly failed to regulate Tornado Cash to stop money laundering.
Meanwhile, the three founders of Tornado Cash, Alexey Persev, Roman Storm and Roman Semenov, are facing challenges following legal and regulatory action against their hybrid protocol.
Alexey Pertev In 2023, he was convicted of money laundering and sentenced to five years and four months in prison in the Netherlands.
Roman Storm was arrested in the United States in August on money laundering charges and later pleaded not guilty to all charges.
He was released on a $2 million bond shortly after his arrest and entered a motion to dismiss all charges on March 31.
The third co-founder, Roman Semenov, is still on.
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