US Sanctions Ethereum Mixer Tornado Cash Citing Ties With North Korea-Backed Web3 Hacks

What Happened: The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the Ethereum ETH/USD application Tornado Cash on Monday, citing ties to North Korean hackers.

Tornado Cash is a digital asset mixing service that facilitates money laundering efforts. It’s common practice for hackers to use Tornado Cash to mix their crypto in attempts to make the hacked funds untraceable.

Tornado Cash has reportedly helped launder over $7 billion in digital assets. Any Ethereum user has the ability to use the application, and users may interact with Tornado Cash to commit tax fraud, launder stolen money, or simply create a privacy layer for their transactions.

More accurately, data pulled directly from Ethereum’s ledger shows over $7.6 billion worth of digital assets has been deposited into Tornado Cash.

The Treasury claims that the North-Korean government backed Lazarus Group has laundered over $455 million through Tornado Cash. The Lazarus Group is a well-known hacker group responsible for numerous data breaches and cryptocurrency hacks. Importantly, funds from the Lazarus group are used to fund North Korea’s nuclear weapons programs.

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Why It Matters: While IP addresses in the United States can no longer access the Tornado Cash website, its protocol remains usable and intact, as the application is built on Ethereum. The government cannot censor applications on Ethereum, so users can still access the application via a computer terminal.

That being said, the team behind Tornado Cash will likely see legal repercussions, and similar applications will be less apt to launch digital asset mixing services, as the United States now clearly opposes the use and creation of these applications. Moreover, sanctions against Tornado Cash make it illegal for any persons in the U.S. to interact with the application.