Banned crypto mixer Tornado Cash has seen a notable resurgence in deposits during the first half of 2024, despite ongoing sanctions and legal challenges faced by its founders.
Significant Increase in Deposit Volume
According to Flipside Crypto, Tornado Cash received $1.9 billion in deposits over the first six months of 2024. This marks a 50% increase compared to the total deposits for the entirety of 2023. This surge comes despite the U.S. Office of Foreign Assets Control (OFAC) sanctioning the platform in August 2022, after the North Korean Lazarus Group used it to launder $455 million in illicit funds.
Impact of OFAC Sanctions
The OFAC sanctions place anyone interacting with Tornado Cash on a blacklist, making it extremely difficult for those wallets to convert their crypto into fiat currency through legally compliant exchanges. Despite this, Tornado Cash remains a popular tool for obfuscating the flow of illicit funds among large hacking groups.
Major Hacks Utilizing Tornado Cash
Several high-profile hacks have funneled significant amounts of stolen funds through Tornado Cash:
- The hacker behind the $100 million Poloniex exchange exploit transferred $76 million to Tornado Cash since May.
- The HECO Bridge and Orbit Chain exploits saw $166 million and $48 million, respectively, moved through the mixer in the first half of 2024.
- A wallet address linked to the $235 million WazirX hack on July 18 was funded via a Tornado Cash deposit.
Also Read: Tornado Cash Developer Alexey Pertsev Denied Bail
Legal Challenges and Industry Backlash
Several figures in the crypto industry are challenging the sanctions on Tornado Cash through an ongoing lawsuit, initially filed in 2022. Plaintiffs argue that the sanctions are “unlawful and unconstitutional,” as the mixing service is neither a country nor an entity. They claim that blocking Tornado Cash infringes on free speech rights under the U.S. Constitution.
The lawsuit has garnered support from major crypto firms such as Coinbase and advocacy groups like The Blockchain Association and Coin Center, all arguing that the sanctions are unlawful. However, the U.S. Treasury maintains that crypto mixers pose a national security threat and that Tornado Cash failed to implement controls to prevent money laundering.
