Tornado Cash

Tornado Cash (also stylized as TornadoCash) is an open source, non-custodial, fully decentralized cryptocurrency tumbler that runs on Ethereum Virtual Machine-compatible networks. It offers a service that mixes potentially identifiable or "tainted" cryptocurrency funds with others, so as to obscure the trail back to the fund's original source. This is a privacy tool used in EVM networks where all transactions are public by default.[1]

Tornado Cash
Developer(s)Roman Semenov, Alexey Pertsev, Roman Storm
Initial release17 December 2019
Stable releasev3 / 16 December 2021
Development statusDiscontinued
Written inSolidity
PlatformEthereum Virtual Machine
TypeCryptocurrency tumbler
LicenseOpen-source licenses
WebsiteTornado.cash , (Blacklisted)

In August of 2022, the U.S. Department of the Treasury blacklisted the service, making it illegal for US citizens, residents and companies to use. The project's web domain and GitHub accounts were also shut down, and one of the developers arrested.

The project is governed through a decentralized autonomous organization (DAO) and uses the $TORN token as a voting system for protocol updates.[2]

On 18 August 2022, Tornado Cash was present on the Ethereum (ETH), Binance Smart Chain, Polygon, and Optimism networks, with Ethereum being the most-used one, having had over US$7.6 billion in ETH go through the mixer.[3]

Functionality

Tornado Cash uses multiple smart contracts that accept different quantities of ETH and ERC-20 deposits.[4] These deposits can later be withdrawn to a different address by providing a cryptographic proof, hence breaking the link in the chain between the sender and the recipient. Zero-knowledge proofs (in particular zk-SNARKs[5]) are used to ensure privacy, and there is no way to link a withdrawal to its deposit, which ensures asset confidentiality.[6]

OFAC blacklisting

On 8 August 2022, the Office of Foreign Assets Control of the U.S. Department of the Treasury blacklisted Tornado Cash, making it illegal for United States citizens, residents, and companies to receive or send money through the service.[7] The Treasury Department accused it of laundering more than $7 billion in virtual currencies, including $455 million believed to have been stolen in 2022 by the Lazarus Group, a hacking group associated with the government of North Korea.[8][9]

Reactions

The same day, the domain used by the project was taken down, and GitHub removed the Tornado Cash repository and suspended the developers' accounts.[10]

Circle, the company behind USD Coin, froze about $75,000 in USDC from Ethereum addresses belonging to the mixer.[11][12]

On 10 August 2022, Tornado Cash developer Alexey Pertsev was arrested in Amsterdam on the suspicion of "involvement in concealing criminal financial flows and facilitating money laundering through the mixing of cryptocurrencies through the decentralised Ethereum mixing service Tornado Cash."[13]

References
  1. Page, Carly; Anita Ramaswamy (8 August 2022). "US Treasury sanctions Tornado Cash, accused of laundering stolen crypto". TechCrunch. Archived from the original on 8 August 2022. ProQuest 2699720538
  2. Dale, Brady (8 August 2022). "Ethereum's best known privacy tool falls under U.S. sanctions". Axios. Archived from the original on 9 August 2022. ProQuest 2699720538
  3. "Tornado Cash Analysis". Dune.com. 18 August 2022. Archived from the original on 18 August 2022. Retrieved 18 August 2022.
  4. Ramakrishnan, Vidya (18 August 2022). "Tornado Cash Ban Raises Questions in the Crypto Community". Investor's Business Daily. Los Angeles. Archived from the original on 12 October 2022. ProQuest 2703590605
  5. "TornadoCash whitepaper v1.4" (PDF). Tornado Cash. Archived from the original (PDF) on 26 October 2021.
  6. Mazorra, Bruno (2022). "Do Not Rug on Me: Leveraging Machine Learning Techniques for Automated Scam Detection". Mathematics. MDPI AG. 10 (6): 949–973. doi:10.3390/math10060949. ProQuest 2642512632 open access
  7. "Cyber-related Designation". U.S. Department of the Treasury. 8 August 2022. Archived from the original on 10 August 2022. Retrieved 10 August 2022.
  8. Yaffe-Bellany, David (8 August 2022). "Treasury Dept. blacklists crypto platform used in money laundering". The New York Times. Archived from the original on 9 August 2022. Retrieved 9 August 2022.
  9. Talley, Ian; Volz, Dustin (8 August 2022). "U.S. Sanctions Crypto Platform Tornado Cash, Says It Laundered Billions". The Wall Street Journal. Archived from the original on 9 August 2022. Retrieved 9 August 2022.
  10. Claburn, Thomas (10 August 2022). "GitHub courts controversy by suspending Tornado Cash developers and reneging on cookie commitments". The Register. Archived from the original on 10 August 2022. Retrieved 10 August 2022.
  11. Sun, Mengqi (12 August 2022). "Tornado Cash's Sanctions Show Shift in Crypto Regulatory Focus". The Wall Street Journal. ISSN 0099-9660. Archived from the original on 16 August 2022. Retrieved 16 August 2022.
  12. "Tornado Cash crackdown by Treasury puts honest crypto investors at risk of criminal exposure". CNBC. 8 August 2022. Archived from the original on 18 August 2022. Retrieved 18 August 2022.
  13. "Arrest of suspected developer of Tornado Cash". Fiscal Information and Investigation Service. 12 August 2022. Archived from the original on 12 August 2022. Retrieved 12 August 2022.
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