The situation has not looked too favorable for the crypto space in recent months, as the market has been severely affected by a series of negative news. On August 8, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury issued legal sanctions against the Tornado Cash digital currency mixing service.
According to the regulator, since its inception in 2019, the platform has been used for a range of illicit money laundering activities estimated to be worth up to $7 billion. Of this total, Lazarus Group (the hacking group sponsored by North Korea) controls $455 million. In addition, Tornado Cash also helped criminals launder over $96 million in illicit funds obtained from the Harmony Bridge hack in June and $7.8 million from the Nomad heist earlier this month as Bitcoin Magazine reported. news.
As a result of the actions of the US government, the price of private coins in the market plummeted catastrophically. Furthermore, a team member confirmed that the Tornado Cash DAO was down “to keep members safe and avoid legal problems” as the situation was “dangerous for all developers.” even those outside the Tornado Cash ecosystem.
However, first of all, it is necessary to understand what a cryptocurrency mixing service is. Simply put, this service scrambles identifiable or nefarious crypto funds to remove traces associated with the assets so that no one can trace the origin of the token.
Tornado Cash creator’s arrest sparked a wave of outcry
On August 12, Tornado Cash creator Alexey Pertsev was arrested by Dutch authorities. Parts were arrested in connection with the “concealing of financial flows,” according to a press release issued by the Netherlands’ financial crime regulator – the Dutch Fiscal Information and Investigations Authority. Crime and facilitate money laundering”.
While it’s possible that the bad guys used Tornado Cash to hide criminal proceeds, the service also facilitates a wide range of legitimate activities. Dutch police have so far not clarified exactly what regulations Pertsev violated, while a wide range of media speculated and offered different explanations as to why he was arrested. As such, the Tornado creator was arrested while still not being charged with any wrongdoing.
After Pertsev’s arrest, many protesters gathered in Amsterdam’s Dam Square on August 20 to express their displeasure with the authorities handling the matter. While these protesters do not directly comment on the legal issues surrounding the arrest, they do assert that the case involving Pertsev warns of a bleak future for the rapidly growing Web3 ecosystem. . Not only that, but they also believe that the event could have a “chilling effect” that frustrates the existing Dutch blockchain ecosystem.
Mark Sargon, cof decentralized payments network Fuse, said that although he was disappointed to see a developer arrested simply for writing a piece of code, to avoid such cases in the future, the crypto financial institutions – especially those who think mainstream market adoption will soon be ready to meet with regulators to limit existing security issues while ensuring personal privacy of the user.