After authorities banned the Russian-founded cryptocurrency platform Tornado Cash over its alleged support for North Korean hackers a year ago, it has been announced that two co-founders of the cryptocurrency mixer have been charged with money laundering and other crimes.
According to the US Justice Department, Roman Semenov and Roman Storm have been charged with conspiring to commit money laundering, conspiring to violate sanctions, and conspiring to operate an unlicensed money-transmitting business. According to a statement issued on Friday. Semenov is expected to appear in court shortly.
It has been announced that US law enforcement officials have charged Tornado Cash's founders with laundering more than $1 billion in criminal proceeds during their operations. There were also allegations of Roman Semenov and Roman Storm taking part in a scheme to launder millions of dollars for the Lazarus Group, a cybercrime organization with connections to the North Korean government, according to a statement made by the US Department of Justice. Storm has been arrested in the state of Washington, while Semenov continues to remain on the run from authorities.
According to the indictment published yesterday, the defendants were charged with conspiring to launder money, conspiring to violate sanctions, and conspiring to operate an unlicensed money transfer business by committing these crimes. Semenov, a native of Russia, remains at large, according to a statement released by the Justice Department Wednesday regarding Storm's arrest in Washington State.
As a consequence, programming experts have been using the open-source code of Tornado Cash to develop new applications that are similar to it.
Tornado Cash is a blockchain-based application, or "smart contracts", that has been designed specifically for use with Ethereum and can still be used with that platform.
Although smart contracts in the U.S. are technically illegal, many apps that interact with the Ethereum blockchain have blocked access to the Tornado Cash app due to sanctions put in place by the United States government. Key blockchain infrastructure providers like Infura and Alchemy – which is used by many of these apps – have censored Tornado Cash as a result of this ban.
Tornado Cash is being described as a "money transfer service for illicit purposes" according to the indictment that was filed by the Department of Justice on Wednesday. However, Storm and Semenov knew their service would be used for illicit purposes when they designed it. Furthermore, the US Department of Justice alleged they maintained control over Tornado Cash, which was a tool that they could have used to monitor transactions or to implement other anti-money laundering features, despite publishing official statements that they had no control over Tornado Cash.
In addition to the indictment mentioning Alexey Pertsev, another co-founder of the organization, many references are made to Pertsev who was arrested last year and is currently awaiting trial for money laundering charges in the Netherlands.
To make sure deposits and withdrawals were tracked, the three founders decided to create an option to use this compliance tool, which was opt-in only. As the DOJ alleges, neither anti-money laundering nor know-your-customer information was collected by the tool, which they claim was not sufficient for their use.
An association with Lazarus
Semenov and Storm are also accused in the indictment of laundering the proceeds of the Lazarus Group. They appear to have been laundering the money as well.
A rogue nation has consistently targeted cryptocurrency businesses, healthcare providers, and IT vendors as part of its effort to accrue foreign currency through the sale of its goods and services in recent years.
A group of people who are connected to Tornado Cash claim that hundreds of millions of dollars were laundered by Tornado Cash between April and May 2022 for Lazarus. A change was implemented in the Coin Mixer's services during this period according to Storm and Semenov's indictment, to show the public that they complied with sanctions by announcing that the Coin Mixer's services had been updated. In private chats, however, the pair agreed that although these changes could be made to Tornado Cash, they would not be able to prevent money laundering from occurring.
Both Storm and Semenov have been charged with conspiring to commit money laundering, as well as conspiring to violate the International Economic Emergency Powers Act, both of which carry a maximum sentence of 20 years in prison if found guilty. The judgments against them carry a maximum sentence of 20 years in prison if found guilty. A criminal charge of conspiracy to operate an unlicensed money transfer business, which carries a maximum prison sentence of five years, has also been filed against the couple.
During a written statement released by her lawyer, Brian Klein, a partner at Waymaker LLP, Storm's lawyer, expressed her frustration at the indictment and expressed her frustration at the charge. A new legal theory with dangerous implications for all software developers, Klein wrote in a letter to the Editor of the New York Times, supports the Justice Department's arrest of his client.
The prosecution's investigation into Mr. Storm has been ongoing since last year, and he has been cooperating with that investigation for the past year, denying any involvement in the criminal case. In the course of the trial, a lot more information will also come out regarding this case.
