In 2024, Tornado Cash, a cryptocurrency mixing service, has seen a notable resurgence despite facing ongoing sanctions and legal challenges. Data from Flipside Crypto reveals that the platform amassed $1.9 billion in deposits within the first six months of the year, a 50% increase compared to all of 2023.
Tornado Cash was sanctioned by the Office of Foreign Assets Control (OFAC) in August 2022 after it was revealed that North Korea’s Lazarus Group had laundered $455 million of stolen funds through the service. These sanctions blacklisted any wallets interacting with Tornado Cash, complicating the withdrawal process through legitimate exchanges.
Despite these restrictions, the platform remains favored by cybercriminals seeking to obscure the origins of illicit funds. Blockchain analytics firm Arkham Intelligence has shown that the hacker behind the $100 million Poloniex exchange hack funneled $76 million through Tornado Cash since May 2024. Hackers from other exploits, such as the HECO Bridge and Orbit Chain breaches, have also moved $166 million and $48 million respectively through the service in the same period.
The continued use of Tornado Cash was underscored by a significant breach at WazirX, an Indian crypto exchange. In July 2024, WazirX reported losing $235 million, with one wallet address tied to the hack being funded via Tornado Cash.
Challenges to the sanctions against Tornado Cash persist. A lawsuit filed in 2022 argues that these restrictions are unconstitutional, as Tornado Cash is not a traditional entity but rather decentralized code, and the sanctions infringe on free speech rights. Major players in the crypto space, including Coinbase, along with advocacy groups like The Blockchain Association and Coin Center, support this legal challenge.
Nevertheless, the U.S. Treasury continues to see crypto mixers like Tornado Cash as a threat to national security due to their role in enabling money laundering. The platform’s co-founders have faced legal action: Alexey Pertsev received over five years in prison in the Netherlands for money laundering, Roman Storm has pleaded not guilty to related charges in the U.S., and Roman Semenov remains a fugitive.
The resurgence of Tornado Cash underscores the difficulty regulators face in managing decentralized finance (DeFi) platforms, where the lack of centralized control creates significant enforcement challenges.
