The Tornado Money website displayed on a laptop and smartphone screen arranged in London, U.K., on Tuesday, March 15, 2022.
Luke McGregor | Bloomberg | Getty Images
Two founders of Tornado Money, the widely known Russian cryptocurrency mixer, have been charged with laundering greater than $1 billion in criminal proceeds.
In a newly unsealed indictment, Roman Storm and Roman Semenov have each been accused of sanctions violations and laundering money through Tornado Money, including lots of of thousands and thousands of dollars for the Lazarus Group, a sanctioned North Korean state-backed hacking group.
Charges within the indictment include conspiring to commit money laundering, conspiracy to commit sanctions violations and conspiracy to operate an unlicensed money transmitting business.
Storm was arrested Wednesday in Washington state, in accordance with an announcement from the Justice Department, but Semenov, a Russian national, stays at large. The third co-founder, Alexey Pertsev, who isn’t mentioned on this motion, faces trial in Amsterdam over his involvement with Tornado Money.
“Roman Storm and Roman Semenov allegedly operated Tornado Money and knowingly facilitated this money laundering,” said U.S. Attorney Damian Williams, adding, “While publicly claiming to supply a technically sophisticated privacy service, Storm and Semenov in actual fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes.”
The indictment also alleged that Storm and Semenov selected to not implement know your customer or anti-money laundering programs as required by law, and as an alternative, advertised that the tumbler “provided untraceable and anonymous financial transactions.”
Wednesday’s joint motion included the Federal Bureau of Investigation, the Justice Department and the Internal Revenue Service’s Criminal Investigation unit.
The Office of Foreign Assets Control (OFAC), which previously banned Americans from using Tornado Money in Aug. 2022, sanctioned Semenov on Wednesday, as well.
Tornado Money is utilized by some people as a legitimate solution to protect their privacy within the still-nascent crypto market. When a buyer pays for something using a crypto wallet, the recipient of the transfer has access to the purchaser’s public crypto wallet, showing account details and history. Using a crypto mixing service like Tornado Money masks those details by anonymizing the funds and concealing the identity of the client.
However the service was also utilized in quite a few high-profile crypto heists in 2022, including the $615 million theft of tokens from Ronin, a network supporting the nonfungible token game Axie Infinity, and a $100 million attack on U.S. startup Harmony. Each were linked by security researchers with Lazarus Group.
Blockchain analytics firm Elliptic found no less than $1.5 billion in proceeds from crimes resembling ransomware, hacks and fraud have been laundered through Tornado Money, and that everything of the $100 million stolen from the Harmony bridge in June was laundered through the service.
The U.S. Treasury previously quoted a much higher figure for Tornado Money and said it has been used to launder greater than $7 billion price of virtual currency because it launched in 2019. That figure refers to the whole value of crypto assets which were sent through Tornado Money.
Some blockchain analytics tools have managed to “demix” crypto sent through Tornado to discover the source of the funds. Elliptic says it was in a position to trace crypto stolen from Harmony to several recent ether wallets, for instance.
In blacklisting Tornado Money on Thursday, the Treasury Department said it was going after criminals, who used the service to launder greater than $7 billion price of virtual currency because it launched in 2019.
