Tornado Cash Developer Arrested After U.S. Sanctions the Cryptocurrency Mixer

Dutch authorities on Friday announced the arrest of a software
developer in Amsterdam who is alleged to be working for Tornado
Cash, days after the U.S. sanctioned the decentralized crypto
mixing service.

The 29-year-old individual is “suspected of involvement in
concealing criminal financial flows and facilitating money
laundering” through the service, the Dutch Fiscal Information and
Investigation Service (FIOD) said^[1]
in a statement.

Although FIOD didn’t reveal the name of the Tornado Cash
engineer, The Block identified^[2]
him as Alexey Pertsev, citing confirmation from his wife. “My
husband didn’t do anything illegal,” she was quoted as saying.

FIOD also alleged that “Tornado Cash has been used to conceal
large-scale criminal money flows, including from (online) thefts of
cryptocurrencies (so-called crypto hacks and scams).”

The agency, which initiated an investigation into Tornado Cash
in June 2022, further hinted it may make more arrests. It also
claimed that the people behind the organization made large-scale
profits from facilitating these illicit transactions.

Earlier this week, Tornado Cash became the second cryptocurrency mixer^[3] to be slapped with
sanctions by the U.S. government after Blender.io^[4]
for playing a central role in helping organized criminal gangs
launder the proceeds of crime such as ransomware and cryptocurrency
hacks.

The platform works by pooling and scrambling various digital
assets from thousands of addresses, including potentially illegally
obtained funds and legitimately obtained funds, to conceal the
trail back to the asset’s original source, giving illegal actors an
opportunity to obscure the origin of the stolen money.

If anything, the latest developments underscore the growing scrutiny^[5]
of cryptocurrency mixing services for what’s being perceived as a
mechanism for cashing out ill-gotten cryptocurrencies.

This includes the cash-strapped North Korean regime, which has
been documented^[6]
to rely on cyberattacks on the cryptocurrency space to plunder
virtual funds, and in the process evade economic and trade sanctions^[7] imposed on the
nation.

The move to blocklist Tornado Cash, therefore, is also seen as
an attempt on part of the U.S. government to respond to North
Korea’s use of cyber warfare against cryptocurrency exchanges and
services to finance its strategic goals.