Suspected Tornado Cash (Ethereum mixer) developer arrested

[mk4]

Apparently, a Tornado Cash(Ethereum-based mixing service) developer was just recently arrested.

I know most people here don't like Ethereum, but I hope we can all agree that everyone has the right to privacy(regardless what your preferred blockchain is), and that arrests like this shouldn't be happening.

Just a heads up that if you're developing(or are planning to develop) a bitcoin/crypto related privacy layer, it's probably best to stay completely anon. There's a reason Satoshi chose to be fully anonymous to start with.

https://www.theblock.co/post/163206/suspected-tornado-cash-developer-arrested-in-amsterdam
https://www.coindesk.com/policy/2022/08/12/netherlands-arrests-suspected-tornado-cash-developer/

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[marcotheminer]

Is there any truth to the allegation that they laundered money, using that tool? If so, arrests like this will continue to happen so long as there are citizens abiding by whichever law states that a crime.

[mk4]

Is there any truth to the allegation that they laundered money, using that tool? If so, arrests like this will continue to happen so long as there are citizens abiding by whichever law states that a crime.

I can't show any links atm, but a good amount if I remember correctly — mostly those funds stolen from DeFi exploits. But yea, criminal-related activity is still a very small minority as far as I know; just like with Wasabi CoinJoins and Bitcoin mixers.

[logfiles]

I think from now on. If someone wants to develop such decentralized tools that Governments seemingly don't like at all because they are taking away their power, it's better for one to remain anonymous. It doesn't matter if the aim was to actually launder money or not, this law enforcement agencies are just super insane and will do anything to try to scare the masses.

Look how the quickly arrested the dev. Meanwhile, super scammers like Do kwon are just there moving on with their business as usual.

[mk4]

I think from now on. If someone wants to develop such decentralized tools that Governments seemingly don't like at all because they are taking away their power, it's better for one to remain anonymous. It doesn't matter if the aim was to actually launder money or not, this law enforcement agencies are just super insane and will do anything to try to scare the masses.

Look how the quickly arrested the dev. Meanwhile, super scammers like Do kwon are just there moving on with their business as usual.

Totally should've been the default. Obviously there are anon devs so there are other people that saw this coming, but I guess some people got a bit too confident that they wouldn't be pursued.

But yea, especially knowing that they were building a privacy app that's guaranteed to be controversial in the eyes of the authorities, not sure what they were thinking lol.

[marcotheminer]

Is there any truth to the allegation that they laundered money, using that tool? If so, arrests like this will continue to happen so long as there are citizens abiding by whichever law states that a crime.

I can't show any links atm, but a good amount if I remember correctly — mostly those funds stolen from DeFi exploits. But yea, criminal-related activity is still a very small minority as far as I know; just like with Wasabi CoinJoins and Bitcoin mixers.

Let me know if there's further reading to your claim of "criminal-related activity" being a "very small minority". I would think it's still a hefty majority. Note that a simple act of tax-avoidance or buying crypto to avoid some-thing in the trad' financial world, is often seen as criminal-related in the eyes of the same laws that protect this trad' financial world. Stay anonymous/untraceable. And for those among us who didn't bother achieving this equivalent (airtight OpSec), may one's good fortune protect one's self.

[ABCbits]

Is there any truth to the allegation that they laundered money, using that tool? If so, arrests like this will continue to happen so long as there are citizens abiding by whichever law states that a crime.

I can't show any links atm, but a good amount if I remember correctly — mostly those funds stolen from DeFi exploits. But yea, criminal-related activity is still a very small minority as far as I know; just like with Wasabi CoinJoins and Bitcoin mixers.

Let me know if there's further reading to your claim of "criminal-related activity" being a "very small minority". I would think it's still a hefty majority.

If you're talking about mixer/CJ in general, Chainalysis proved it some years ago[1]. Their latest report crime report[2] also mention mixer isn't majority/most popular based on few crime activity type, with exception of North Korean hacker group. But take note i only skimmed their latest report.

[1] https://bitcoinmagazine.com/culture/chainalysis-most-mixed-bitcoin-not-used-for-illicit-purposes
[2] https://go.chainalysis.com/2022-crypto-crime-report.html page 12, 43, 62, 80, 108 and 115.

[u80huc]

States is revolting parasites.
Now they show their true colours.

If money is not fungible, then it implies that you need state's permission to use money, i.e, act as a human being.

[marcotheminer]

If you're talking about mixer/CJ in general, Chainalysis proved it some years ago[1]. Their latest report crime report[2] also mention mixer isn't majority/most popular based on few crime activity type, with exception of North Korean hacker group. But take note i only skimmed their latest report.

[1] https://bitcoinmagazine.com/culture/chainalysis-most-mixed-bitcoin-not-used-for-illicit-purposes
[2] https://go.chainalysis.com/2022-crypto-crime-report.html page 12, 43, 62, 80, 108 and 115.

I see, thanks for the references!

[bbc.reporter]

News update.

Coin Center has filed a lawsuit versus the OFAC or Office of Foreign Assets Control. This department is under controled by the Treasury department of America where our favorite grandma, Janet Yellen is the head of this department.

In any case, I do not really understand the 4 claims in the lawsuit but I ask the people who do. Does Coin Center have a case or will the courts keep blocking this until it reaches the supreme court? This might be something similar to Larry Flynt's landmark case about the protection of free speech.



Today, Coin Center, along with a group of normal privacy-seeking workers, donors, activists, and public figures, filed a lawsuit against the Treasury Department to keep privacy normal, to delist Tornado Cash privacy tools from sanctions, and to enjoin Treasury from enforcing against ordinary Americans exercising their self-evident and basic rights to privacy.

Source https://www.coincenter.org/coin-center-is-suing-ofac-over-its-tornado-cash-sanction/

[PrimeNumber7]

News update.

Coin Center has filed a lawsuit versus the OFAC or Office of Foreign Assets Control. This department is under controled by the Treasury department of America where our favorite grandma, Janet Yellen is the head of this department.

In any case, I do not really understand the 4 claims in the lawsuit but I ask the people who do. Does Coin Center have a case or will the courts keep blocking this until it reaches the supreme court? This might be something similar to Larry Flynt's landmark case about the protection of free speech.

I hope that "Coin Center" wins. I don't think there is statutory authority to have Tornado Cash on the OFAC list. The government might argue that the coin on Tornado Cash is the property of the developer, who I believe is a foreign national, and this would get around the argument that the government cannot sanction a smart contract. I don't see any other argument supporting the sanctions.

Both the sanctions and the lawsuit are making what I believe to be novel claims, especially around the statutory authority. It is difficult to predict how lower courts will rule, however, I think this is a case the Supreme Court will ultimately decide.

[bbc.reporter]

@PrimeNumber7. However, the code for Tornado Cash is opensource which makes it no single person's property. There is also an argument that if a car was used to do a crime, can the government go after the creator of the car?

Also, was it not argued before that code is free speech? I have heard this mentioned many times in the cryptospace before.  



Communication does not lose constitutional protection as “speech” simply because it is expressed in the language of computer code.

Source http://digital-law-online.info/lpdi1.0/treatise50.html


I reckon this certainly makes the sanction on Tornado Cash also an attack to free speech.

[mk4]

Also, was it not argued before that code is free speech? I have heard this mentioned many times in the cryptospace before.  

*snip*

I reckon this certainly makes the sanction on Tornado Cash also an attack to free speech.

It certainly is, and that quote has surfaced a lot when this news spread. It's just that apparently the US authorities only respects free speech when it's convenient.

[LeGaulois]

I'm not a conspiracy theorist but the accusations might just be an excuse. Think about the tension between Biden and Putin. It's a way to harass Putin, and why not use it as a tool in the war, with Biden meddling in what is none of his business.

I don't know if you had read this article that was published several days ago in which it says that Alexey Pertsev is a Russian spy who worked for the KGB. There's a story about a company he worked for and all that.

While Coincenter has a great argument to call it an excess of authority, it could work against OFAC but chances are small in my opinion.
Better to rely on the law because OFAC is incoherent with it.

What it says:

The International Emergency Economic Powers Act of 1977, which is the statutory descendant of the Trading with the Enemy Act of 1917, allows the President to restrict trade with foreign enemies under emergency conditions.

OK that's fine, even we could debate on what exactly is "an emergency condition" but there are no identified foreign enemies with tornado cash.
There is nothing more to look further, we shouldn't have to continue with privacy rights, open source, computer code...

[bbc.reporter]

Also, was it not argued before that code is free speech? I have heard this mentioned many times in the cryptospace before.  

*snip*

I reckon this certainly makes the sanction on Tornado Cash also an attack to free speech.

It certainly is, and that quote has surfaced a lot when this news spread. It's just that apparently the US authorities only respects free speech when it's convenient.

Someone should certainly do something especially if you are an American. It is a free speech rugpull hehe. If there is not a landmark case created and win to precede all of the other similar cases that might occur in the future, the freedom we presently have in the cryptospace or also on the internet will become much smaller and the rights we presently enjoy will be more unreliable.

[DaveF]

To use the car analogy that bbc.reporter used.
No, you can't go after the person who BUILT that car. Unless they KNEW it was going to used in the commission of a crime.
The getaway driver is frequently charged.

Writing the software is not a crime. Running may or may not be depending on what transactions went through. DELIBERATELY helping people who have sanctions against them is a crime. And here is where it gets murky, receiving funds from somebody with sanctions against them is also a crime. EVEN IF YOU DON'T KNOW IT. It's the ignorance is no excuse. Sucks, but that has been up and down the court system for years.

-Dave

[PrimeNumber7]

@PrimeNumber7. However, the code for Tornado Cash is opensource which makes it no single person's property. There is also an argument that if a car was used to do a crime, can the government go after the creator of the car?

Code being open source does not mean that no one owns said code.

Many open-source projects attach one (or more) of various licenses that allow others to freely replicate and/or modify their published code freely.

Open-source or not, someone had to publish the Tornado Cash code onto the electrum blockchain so its smart contract can execute. This person would, IMO, would be the one who "owns" this particular instance of the code.

Also, was it not argued before that code is free speech? I have heard this mentioned many times in the cryptospace before. 

This is one of the claims in the lawsuit cited in the previous article you posted.

I think the free-speech claim has more merit for the developer of Tornado Cash than for its customers/users. I don't think the users of Tornado Cash are actually effectively saying anything by using its service.

[bbc.reporter]

@PrimeNumber7. The developer of Tornado Cash is the person being held in a prison for charges the government are not quite certain what. This might end in something similar to Ross Ulbricht where it was possible that the judge, the jury and everyone working in the court knew already what type of sentence was going to be given.

In any case, have these type of sanctions gone to the extreme? Clearly yes.

It also appears that Ethereum users will need an application to know if certain coins came from Tornado Cash hehehehe.



On Wednesday, David Hoffman, a crypto evangelist and host of the popular industry podcast Bankless, filed suit against the Treasury Department over sanctions it issued earlier this year against Tornado Cash, a tool that anonymizes cryptocurrency transactions. (Coin Center, a think tank for the industry, joined him in the suit.) According to the Treasury’s Office of Foreign Assets Control, the department’s sanctioning arm, the blacklisting is a response to the Lazarus Group, the North Korean hacking army it claims has stolen and laundered some $500 million. The problem, though, is that Tornado Cash isn’t a company or a person — it’s code that lives on the ethereum blockchain, and there’s no way for anyone to control or destroy the protocol. Since Tornado Cash isn’t an entity, it can’t appeal. It’s up to people like Hoffman, who claims he may be forced to affirm every year that he’s not a criminal — not because he has used it or has some connection to North Korea, but because he once had someone send him money using Tornado Cash.

Source https://nymag.com/intelligencer/2022/10/have-u-s-crypto-sanctions-gone-too-far.html

[Darker45]

~snip~

This is far different from the case of Ross Ulbricht. Ross created and operated a marketplace where illegal stuff are sold. He may not be the one selling, but it's his website, his store. And he's very much aware of the illicit deals there. He, therefore, facilitated these transactions. He could have regulated it so that only legal goods and services are allowed.

In the case of Tornado Cash, it's just a code that is open and available to everybody. The authorities are, therefore, in a quandary as to how to deal with the developer. He didn't facilitate money laundering. It's very possible he was never even aware of it. So how should he be blamed for it. But I guess the authorities just want heads to roll, whoever they may be. It can't be left unattended. Somebody has to fall and suffer to instill fear. The problem, however, is that unlike the Silk Road, the code can't actually be shut down.

[PrimeNumber7]

@PrimeNumber7. The developer of Tornado Cash is the person being held in a prison for charges the government are not quite certain what. This might end in something similar to Ross Ulbricht where it was possible that the judge, the jury and everyone working in the court knew already what type of sentence was going to be given.

In any case, have these type of sanctions gone to the extreme? Clearly yes.

It also appears that Ethereum users will need an application to know if certain coins came from Tornado Cash hehehehe.



On Wednesday, David Hoffman, a crypto evangelist and host of the popular industry podcast Bankless, filed suit against the Treasury Department over sanctions it issued earlier this year against Tornado Cash, a tool that anonymizes cryptocurrency transactions. (Coin Center, a think tank for the industry, joined him in the suit.) According to the Treasury’s Office of Foreign Assets Control, the department’s sanctioning arm, the blacklisting is a response to the Lazarus Group, the North Korean hacking army it claims has stolen and laundered some $500 million. The problem, though, is that Tornado Cash isn’t a company or a person — it’s code that lives on the ethereum blockchain, and there’s no way for anyone to control or destroy the protocol. Since Tornado Cash isn’t an entity, it can’t appeal. It’s up to people like Hoffman, who claims he may be forced to affirm every year that he’s not a criminal — not because he has used it or has some connection to North Korea, but because he once had someone send him money using Tornado Cash.

Source https://nymag.com/intelligencer/2022/10/have-u-s-crypto-sanctions-gone-too-far.html

If sanctions are being placed on an entity that does not exist, it is a statutory defect.

There are many cases in which the outcome is clear to most involved in the case because the evidence is clear. The evidence against Ulbright was strong, and there is additionally evidence that Ulbright knew what he was doing was going to result in a long prison sentence if he was caught. I think the law is less clear in the case of Tornado Cash.

[bbc.reporter]

~snip~

This is far different from the case of Ross Ulbricht. Ross created and operated a marketplace where illegal stuff are sold. He may not be the one selling, but it's his website, his store. And he's very much aware of the illicit deals there. He, therefore, facilitated these transactions. He could have regulated it so that only legal goods and services are allowed.

In the case of Tornado Cash, it's just a code that is open and available to everybody. The authorities are, therefore, in a quandary as to how to deal with the developer. He didn't facilitate money laundering. It's very possible he was never even aware of it. So how should he be blamed for it. But I guess the authorities just want heads to roll, whoever they may be. It can't be left unattended. Somebody has to fall and suffer to instill fear. The problem, however, is that unlike the Silk Road, the code can't actually be shut down.

Agreed that they are very different cases, howver, I was only implying that the government, the court, the judge might treat this similar to Ross Ulbricht's case. This case will only be a show to try and make everyone afraid. They will take this case and make it an example of what might happen to someone if they develop mixing protocols. But also similar to the darknet's large growth since the imprisonment of Ross, it will show everyone that the government's tactics will not work hehehe.

[Darker45]

~snip~

This is far different from the case of Ross Ulbricht. Ross created and operated a marketplace where illegal stuff are sold. He may not be the one selling, but it's his website, his store. And he's very much aware of the illicit deals there. He, therefore, facilitated these transactions. He could have regulated it so that only legal goods and services are allowed.

In the case of Tornado Cash, it's just a code that is open and available to everybody. The authorities are, therefore, in a quandary as to how to deal with the developer. He didn't facilitate money laundering. It's very possible he was never even aware of it. So how should he be blamed for it. But I guess the authorities just want heads to roll, whoever they may be. It can't be left unattended. Somebody has to fall and suffer to instill fear. The problem, however, is that unlike the Silk Road, the code can't actually be shut down.

Agreed that they are very different cases, howver, I was only implying that the government, the court, the judge might treat this similar to Ross Ulbricht's case. This case will only be a show to try and make everyone afraid. They will take this case and make it an example of what might happen to someone if they develop mixing protocols. But also similar to the darknet's large growth since the imprisonment of Ross, it will show everyone that the government's tactics will not work hehehe.

Yeah, but at least in the case of Ulbricht the government knows what it is doing. They know where they are coming from. They were up against something that is clearly illegal as per the letters of the law. This is not the case with Tornado Cash. Money laundering, of course, is illegal but the one who wrote the code is not the one that is laundering money. The one who wrote the code didn't have anything to do with the laundering itself. Moreover, writing codes isn't a crime, either. So the dots simply don't connect. This case has a lot of gray areas as compared to Ross' case.

[DaveF]

Yeah, but at least in the case of Ulbricht the government knows what it is doing. They know where they are coming from. They were up against something that is clearly illegal as per the letters of the law. This is not the case with Tornado Cash. Money laundering, of course, is illegal but the one who wrote the code is not the one that is laundering money. The one who wrote the code didn't have anything to do with the laundering itself. Moreover, writing codes isn't a crime, either. So the dots simply don't connect. This case has a lot of gray areas as compared to Ross' case.

Playing devils advocate here, but until it goes to trial we don't know everything. I *think* that there is more to it then we are seeing but that is just a personal guess from other cases. Writing the software to launder money is not illegal by itself. Getting paid to do it is if you know that it will be used for illegal reasons. Running the software may or may not be legal depending on a bunch of things. Getting paid / taking money to do it is.

It's a fuzzy line, and where you cross it can not always be obvious.

-Dave

[Darker45]

Yeah, but at least in the case of Ulbricht the government knows what it is doing. They know where they are coming from. They were up against something that is clearly illegal as per the letters of the law. This is not the case with Tornado Cash. Money laundering, of course, is illegal but the one who wrote the code is not the one that is laundering money. The one who wrote the code didn't have anything to do with the laundering itself. Moreover, writing codes isn't a crime, either. So the dots simply don't connect. This case has a lot of gray areas as compared to Ross' case.

Playing devils advocate here, but until it goes to trial we don't know everything. I *think* that there is more to it then we are seeing but that is just a personal guess from other cases. Writing the software to launder money is not illegal by itself. Getting paid to do it is if you know that it will be used for illegal reasons. Running the software may or may not be legal depending on a bunch of things. Getting paid / taking money to do it is.

It's a fuzzy line, and where you cross it can not always be obvious.

-Dave

Yeah, we're speculating here. The trial must be interesting to follow considering that this might be the first. Surely, there hasn't been a jurisprudence on this. There is, therefore, also a need to monitor developments as this case might set a really bad legal precedent.

As a matter of fact, that code is considered speech and is therefore protected by the First Amendment is still a legal issue and hasn't been settled with finality.

Anyway, the code that we're talking about here wasn't written to launder money. And whether the one who wrote it was fully aware that it could be used for illegal reasons, he shouldn't take the blame when the actual crime takes place.

[bbc.reporter]

@PrimeNumber7. The developer of Tornado Cash is the person being held in a prison for charges the government are not quite certain what. This might end in something similar to Ross Ulbricht where it was possible that the judge, the jury and everyone working in the court knew already what type of sentence was going to be given.

In any case, have these type of sanctions gone to the extreme? Clearly yes.

It also appears that Ethereum users will need an application to know if certain coins came from Tornado Cash hehehehe.



On Wednesday, David Hoffman, a crypto evangelist and host of the popular industry podcast Bankless, filed suit against the Treasury Department over sanctions it issued earlier this year against Tornado Cash, a tool that anonymizes cryptocurrency transactions. (Coin Center, a think tank for the industry, joined him in the suit.) According to the Treasury’s Office of Foreign Assets Control, the department’s sanctioning arm, the blacklisting is a response to the Lazarus Group, the North Korean hacking army it claims has stolen and laundered some $500 million. The problem, though, is that Tornado Cash isn’t a company or a person — it’s code that lives on the ethereum blockchain, and there’s no way for anyone to control or destroy the protocol. Since Tornado Cash isn’t an entity, it can’t appeal. It’s up to people like Hoffman, who claims he may be forced to affirm every year that he’s not a criminal — not because he has used it or has some connection to North Korea, but because he once had someone send him money using Tornado Cash.

Source https://nymag.com/intelligencer/2022/10/have-u-s-crypto-sanctions-gone-too-far.html

If sanctions are being placed on an entity that does not exist, it is a statutory defect.

There are many cases in which the outcome is clear to most involved in the case because the evidence is clear. The evidence against Ulbright was strong, and there is additionally evidence that Ulbright knew what he was doing was going to result in a long prison sentence if he was caught. I think the law is less clear in the case of Tornado Cash.

My argument was more about the treatment of the government on the defendant. I would speculate that if a mixing protocol developer would become very popular the treatment would be something similar to Wikileaks founder Julian Assange.

In any case, what is the government of Netherlands demanding from the Tornado Cash developer? Do they want him to publish a statement and condemn his own project? There was a mixer before that did this hehehehe.

[logfiles]

Update:

According to some news sources, the Court has ruled that the Tornado Cash Developer be released, but he will be under house arrest.

- From next week he will continue to be monitored and under home arrest.

- A court panel in the Netherlands had previously rejected the bail.

The developer of Tornado Cash reportedly received some kind of redress from a Dutch court. From the beginning of next week on, he will continue to be monitored and under home arrest. No official accusations have been brought against Alexey Pertsev, who has been in pre-trial custody since August.

I am still trying to wrap my head around the fact that these guys had all the guts to arrest the Dev. Dick move IMO.

[Darker45]

Update:

According to some news sources, the Court has ruled that the Tornado Cash Developer be released, but he will be under house arrest.

- From next week he will continue to be monitored and under home arrest.

- A court panel in the Netherlands had previously rejected the bail.

The developer of Tornado Cash reportedly received some kind of redress from a Dutch court. From the beginning of next week on, he will continue to be monitored and under home arrest. No official accusations have been brought against Alexey Pertsev, who has been in pre-trial custody since August.

I am still trying to wrap my head around the fact that these guys had all the guts to arrest the Dev. Dick move IMO.

Dick move, of course, but at least the developments are seemingly in his favor. Little victories are seen. A house arrest is a lot better than being jailed, and only for pre-trial. If a house arrest, even bail, is afforded to the fraud Sam Bankman-Fried, I guess it is the more reasonable that it is also granted to Alexey Pertsev. After all, Alexey Pertsev just wrote a code that is open for everybody to use. Unlike Sam Bankman-Fried, Pertsev is not directly running a fraudulent company himself.

[PrimeNumber7]

I am still trying to wrap my head around the fact that these guys had all the guts to arrest the Dev. Dick move IMO.

I don't agree with the conclusion, but if the government concludes someone has broken the law, and if the crime is sufficiently serious, the person who broke the law will be arrested and charged with the crime in question.

[logfiles]

I don't agree with the conclusion, but if the government concludes someone has broken the law, and if the crime is sufficiently serious, the person who broke the law will be arrested and charged with the crime in question.

Government is not always right. It also always makes wrong/malicious decisions to wrongfully arrest and incarcerate individuals because they want to make them silent, discourage them from raising awareness to the masses or even try to scare the masses that they might be the next to be arrested.

The dev committed no crime.

For example, How many billions of dollars have been "Laundered" through Ethereum? We know who the Devs are. Why aren't they being charged by the SEC or whatever Law enforcement agency is out there?

[bbc.reporter]

Update:

According to some news sources, the Court has ruled that the Tornado Cash Developer be released, but he will be under house arrest.

- From next week he will continue to be monitored and under home arrest.

- A court panel in the Netherlands had previously rejected the bail.

The developer of Tornado Cash reportedly received some kind of redress from a Dutch court. From the beginning of next week on, he will continue to be monitored and under home arrest. No official accusations have been brought against Alexey Pertsev, who has been in pre-trial custody since August.

I am still trying to wrap my head around the fact that these guys had all the guts to arrest the Dev. Dick move IMO.

They arrested him to send a message very much similar how the mafia sends a message to create fear. They did not need a reason or a legal case, there was really no real case behind the arrest. However, this will certainly only cause some developers to be more anonymous and to develop better tools to help maintain everyone's anonymity in everything we do online.