Tornado cash founders charged with money laundering/sanctions violations

[DaveF]

What it comes down to is what the developers knew and when they knew it.

IF and this is an IF. The government can prove that they knew that the Lazarus people were running money through their service then it's a different story then if the Lazarus people happened to use their service.

Did the government find or have an email / SMS / whatever discussion between them? That is a lot more damning then having an address on a list of 'known bad addresses' Was there communication between the developers that the government has that has them discussing that possibly they should not allow these addresses though the service, but they decided to let them so they could make their cut of the mixing. Both of these things are a lot worse then their service being used to move the money because 'it was there'

We don't know, what we don't know and all we can do here is speculate.

-Dave

[1714240899]

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[1714240899]

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[hugeblack]

Does anyone know the reason for the arrest? Because as far as I know, the operation of the mixer is not of interest, and money laundering is often linked to financial services that are provided without verifying identity, but in the case of the mixer, they do not deal in US dollars, so it is most likely that the reason is related to something else.

I'll read the details of what's going on but maybe this arrest explains why the recent bitcoin mixing service went missing scamming.

[DaveF]

Does anyone know the reason for the arrest? Because as far as I know, the operation of the mixer is not of interest, and money laundering is often linked to financial services that are provided without verifying identity, but in the case of the mixer, they do not deal in US dollars, so it is most likely that the reason is related to something else.

I'll read the details of what's going on but maybe this arrest explains why the recent bitcoin mixing service went missing scamming.

Did you read the link in the 1st post?

In a Wednesday indictment, the feds alleged that Roman Storm and Roman Semenov laundered more than $1 billion in criminal proceeds, and charged them with conspiracy to commit money laundering, sanctions violations, and conspiracy to operate an unlicensed money-transmitting business.

The conspiracy charge as a rule TENDS TO but not always show that they knew what they were taking and moving from people / organizations they KNEW they were not supposed to.

If you buy something on craigslist that is stolen you can be charged with receiving stolen property. You did not have to know it was stolen. And usually you have to have some other fuckups for the government to really go after you. If you an a regular basis buy things from someone on craigslist for 10% of the value that still has store security tags on it. Then they will probably charge you with the conspiracy to receive stolen property.

-Dave

[hugeblack]

Did you read the link in the 1st post?
-Dave

I explored sources directly, which did not contain the reason for the accusation, but the above text is quoted from a different source, which is^[1].

I do not think that the problem is running a mixing service or helping others hide their identity, but it is related to North Korea. It seems that the developer has a connection with an active group from North Korea that launders money for the government, so you find the charges include money laundering, and violating sanctions, which are OFAC sanctions.

It is also noted that there are accusations vs signatures that they wear that they are also a front for that North Korean group.

Generally, let's see how he will defend himself and whether these accusations are true, but it is better for privacy services developers to keep themselves anonymous.

“These included funds stolen through hacks by a group believed to be associated with North Korea. Tornado Cash started in 2019 and according to FACT it has since achieved a turnover of at least seven billion dollars,” the announcement notes.

[1] https://decrypt.co/153481/tornado-cash-money-laundering-charges-arrest-justice-department




Off-topic: I have always wondered why your name is written at the end of each reply. Was the account managed by more than one user? Or is there a story behind it?

-Dave

[DaveF]

Off-topic: I have always wondered why your name is written at the end of each reply. Was the account managed by more than one user? Or is there a story behind it?

-Dave

Can't speak for anyone else who does it but I do it because I'm old and nerdy and have been online for over 40 years. Back before the internet, back before dialing into services like AOL back before a lot.... You had places like CompuServe: https://en.wikipedia.org/wiki/CompuServe And BBSs that you dialed directly into:
https://en.wikipedia.org/wiki/Bulletin_board_system

With CompuServe your ID was a 5 digit number a comma and a 3 digit number like this 12345,123
Many (most?) of the early BBSs your ID was your user number so here I would not be DaveF but #300014

So many of us just got in the habit of putting -YourName the end so people knew who you were.
Four decades later, it's just pure habit.

-Dave

[bbc.reporter]

Yes, it is their job. We are not questioning this. We are questioning if it was right for the government to imprison people who had no connection to the crimes that are happening through the software that they only created.

I assume the developer got arrested but that doesnt mean he was already imprisoned. I believe he is just investigated as per protocols and probably out by now. We know how things work, since they dont have a conclusive proof of allegations made.

But the cryptospace is giving some of this power back to the people. The government does not want this.

Did I say I didnt believe that? I am here on forum and of course also a fan of decentralized approach but we live mixed up with the Government isnt it? there are protocols that we should also followed as part of being its citizen. Im just in the middle.

In any case, if you want the government to control the whole cryptospace so that criminals cannot use it then we should demand for more centralization of our favorite projects and demand for more invasive regulations.

The hell I can be control by them. Not even work for the government eversince why I let them control me? Surely they acted like that due to the incidents happening on crypto. If theres no hack then surely they will shut their freakin mouth. The problem here is the composition of Government which mixed up with the sharks who wanted power.

The government has no right to arrest anyone who did not do any crime. This is a violation of basic human rights.

Yes, we are in the middle and sometimes we cannot do anything, however, what we should have is critical thinking. This is another thing that the owners of the world do not want, people who are thinking and talking about how they are being scammed and fooled by the government and by the corporations.

Also, we are always being controlled and being manipulated by them. They tell us what to buy, what to think, how to act, what our politics should be, everything in our lives is based on everything that they have built, own and control.

[yhiaali3]

I don't know why this accident reminds me of a stupid law here in my country. The law says (with what it means) that if someone falls from the top of a balcony onto a car that was parked below in the street, the owner of the car is considered the cause of death and he will be charged and imprisoned for trial.

This is not a joke, it's a law that already exists here, can you believe this? What is the relationship of the owner of the car? This person was going to die anyway whether there was a car on the street or not?

My point of this is the ability of governments to invent wondrous laws that suit them perfectly and facilitate reaching their goals, regardless of whether these laws seem reasonable or not. So, is it possible for a person to use the mixer to launder money, and then the government arrests the mixer because it was unable to arrest this person? Long live intelligence.

[o_e_l_e_o]

Stumbled across this post on Reddit, where the OP nicely expresses the same sentiments I expressed earlier in this thread:

The so-called "anti-money laundering" movement that pushed for this indictment is a fascist mass-surveillance ideology wrapped up in euphemisms. It's reminiscient of the surveillance state ideology espoused by the CCP in China.

This doesn't just apply to mixers, but to everything that is pushed in the name of "AML". They'll go after mixers, after peer to peer trades, after DEXs, after the stupidly named "self hosted" wallets (which just means holding your own keys), after any and all services which don't collect KYC data. They can't stand a form of money which they do not have absolute control over. It weakness their control, weakness their grip on your life. Their ultimate goal is that all bitcoin is bought and paid for only on regulated KYC platforms, and it never leaves those regulated KYC platforms. The only thing you will be allowed to do with it is send it from one regulated KYC platform to another, using a list which they will create of "approved" platforms. Owning your own keys won't be allowed. Making your own transactions won't be allowed.

Unless people stop acquiescing to the ever more intense and invasive demands of centralized exchanges, then this is the future we are sleep walking in to.

[Agbe]

Im not sure what would others say about using mixers. Yes its for usign crypto for privacy, but we cant deny the fact that aside from this particular reason. Scammers arw gonna use it tp hide their scent or crime by using mixers. Cant blame the DOJ on this one. So other mixers might be in trouble too. In relation tok this big case being done on Tornado.

Even new or small mixers might get in trouble too as for sure scammers are already using those. Does owners of mixers can ban wallets or known scammers address for usage? Maybe this can help to make them free from charges like this and avoid incident like what happened to the Tornado founders.

One man sin does not affect the other man or his neighbor. Everyone carry their load. When CM management was found guilty of his crime other mixers were not affect. Criminality is not only found in mixers but all spare of life. One thing that caused criminality in this companies are greedy and corruption. And mixer management that is not greedy and not corrupt that mixing company is good. And that doesn't mean that criminals will not come and use the mixer again, they must surely use it but it the hands of the MD is clean then there is nothing to fear. We should blame other mixers because one mixer is found guilty. Mixers are own by human and not all humans are bad. Everyone carry their own cross.

[NotATether]

Im not sure what would others say about using mixers. Yes its for usign crypto for privacy, but we cant deny the fact that aside from this particular reason. Scammers arw gonna use it tp hide their scent or crime by using mixers. Cant blame the DOJ on this one. So other mixers might be in trouble too. In relation tok this big case being done on Tornado.

Even new or small mixers might get in trouble too as for sure scammers are already using those. Does owners of mixers can ban wallets or known scammers address for usage? Maybe this can help to make them free from charges like this and avoid incident like what happened to the Tornado founders.

One man sin does not affect the other man or his neighbor. Everyone carry their load. When CM management was found guilty of his crime other mixers were not affect. Criminality is not only found in mixers but all spare of life. One thing that caused criminality in this companies are greedy and corruption. And mixer management that is not greedy and not corrupt that mixing company is good. And that doesn't mean that criminals will not come and use the mixer again, they must surely use it but it the hands of the MD is clean then there is nothing to fear. We should blame other mixers because one mixer is found guilty. Mixers are own by human and not all humans are bad. Everyone carry their own cross.

Bad actors will abuse any service or industry they can find to accomplish their own agenda. But most people in positions of power and governments are too gullible to believe in any other resolution than the immediate destruction of any service that is not controlled by some regulated entity.

It's classic "more power to the few, at the expense of the many" event.

[dkbit98]

This doesn't just apply to mixers, but to everything that is pushed in the name of "AML". They'll go after mixers, after peer to peer trades, after DEXs, after the stupidly named "self hosted" wallets (which just means holding your own keys), after any and all services which don't collect KYC data.

I think they even have plans to expand AML crap to social media and to the whole internet, just look what that fool Elon Musk is doing with twitter aka X, wanting to turn it up into all-in-one app and add KYC verification  
If people comply with all this upcoming crazy stuff than they can say goodbye to any freedom in their life, but everything will be masked for their ''safety''.
New laws are applied in Europe and maybe we are going to see crazy autumn on social media (and in forums) this year, so better watch out what you write in public.
What's next? Thought Police maybe?  

[bbc.reporter]

Stumbled across this post on Reddit, where the OP nicely expresses the same sentiments I expressed earlier in this thread:

The so-called "anti-money laundering" movement that pushed for this indictment is a fascist mass-surveillance ideology wrapped up in euphemisms. It's reminiscient of the surveillance state ideology espoused by the CCP in China.

This doesn't just apply to mixers, but to everything that is pushed in the name of "AML". They'll go after mixers, after peer to peer trades, after DEXs, after the stupidly named "self hosted" wallets (which just means holding your own keys), after any and all services which don't collect KYC data. They can't stand a form of money which they do not have absolute control over. It weakness their control, weakness their grip on your life. Their ultimate goal is that all bitcoin is bought and paid for only on regulated KYC platforms, and it never leaves those regulated KYC platforms. The only thing you will be allowed to do with it is send it from one regulated KYC platform to another, using a list which they will create of "approved" platforms. Owning your own keys won't be allowed. Making your own transactions won't be allowed.

Unless people stop acquiescing to the ever more intense and invasive demands of centralized exchanges, then this is the future we are sleep walking in to.

I very much agree. On the case of the Tornado Cash founders, the DOJ used fud by implying that the Lazarus group might be using Tornado Cash to mix their funds. I reckon none of this is connected to the Lazarus group because their funds are being tracked already. It is speculated that the Lazarus group storyline was only a fear tactic or a distraction used to force the amendment and the creation of more executive orders to use against the cryptospace.



OFAC sanctioned the Lazarus Group on September 13, 2019, pursuant to Executive Order (E.O.) 13722, and identified it as an agency, instrumentality, or controlled entity of the Government of North Korea. The Lazarus Group has operated for more than 10 years and is believed to have stolen over $2 billion worth of digital assets across multiple thefts. Due to the pressure of robust U.S. and United Nations sanctions, the DPRK has resorted to using illicit tactics, such as cyber-enabled heists perpetrated by the Lazarus Group, to generate revenue for its unlawful weapons of mass destruction and ballistic missile programs.

Semenov is being designated pursuant to E.O. 13694, as amended by E.O. 13757, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity described in subsections (a)(ii) or (a)(iii)(A) of E.O. 13694, as amended, or any person whose property and interests in property are blocked pursuant to E.O. 13694, as amended; and pursuant to E.O. 13722 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the Government of North Korea, a person whose property and interests in property are blocked pursuant to E.O. 13722.

Source https://home.treasury.gov/news/press-releases/jy1702

[o_e_l_e_o]

-snip-

I'm sure the DoJ will be equally punitive against any fiat banks caught to be laundering money for North Korea though, right!?

Like when JPMorgan Chase laundered $89 million for 11 companies which they knew were linked to North Korea and were previously flagged as being suspicious? Or when BNY Mellon laundered $86 million in transactions which had "no clear commercial reason" for individuals which had talked openly in the media about "conducting business with North Korea"? I'm sure the DoJ will soon be handing out some punishments soon, right!?

Oh no, those documents came out 3 years ago and literally nothing happened: https://www.nbcnews.com/news/world/secret-documents-show-how-north-korea-launders-money-through-u-n1240329

As I said above, this has absolutely nothing to do with money laundering, and has everything to do with the government losing its grip on your lives. They don't care about money being laundered at all, as long as it is the right people doing the laundering.

[examplens]

As I said above, this has absolutely nothing to do with money laundering, and has everything to do with the government losing its grip on your lives. They don't care about money being laundered at all, as long as it is the right people doing the laundering.

I completely agree with this statement, but does the "selective" ban of the service, according to the AML excuse, in addition to attempts to control the sphere of bitcoins and cryptocurrencies, perhaps lead to an attempt of a final ban on crypto?

I didn't really follow the whole issue much, but what is done with seized funds from services that were closed due to money laundering? CM for example, or what is done with the money that someone has determined came from the Lazarus group or similar? Does he return to the original victims?

[bbc.reporter]

-snip-

I'm sure the DoJ will be equally punitive against any fiat banks caught to be laundering money for North Korea though, right!?

Like when JPMorgan Chase laundered $89 million for 11 companies which they knew were linked to North Korea and were previously flagged as being suspicious? Or when BNY Mellon laundered $86 million in transactions which had "no clear commercial reason" for individuals which had talked openly in the media about "conducting business with North Korea"? I'm sure the DoJ will soon be handing out some punishments soon, right!?

Oh no, those documents came out 3 years ago and literally nothing happened: https://www.nbcnews.com/news/world/secret-documents-show-how-north-korea-launders-money-through-u-n1240329

As I said above, this has absolutely nothing to do with money laundering, and has everything to do with the government losing its grip on your lives. They don't care about money being laundered at all, as long as it is the right people doing the laundering.

What the Tornado Cash founders appear to have done wrong is if they wanted to develop opensource software that might be cracked down by the government, they should have done this more anonymously similar to what Satoshi has done when he began developing bitcoin. This is not only good for security, it will also encourage more developers to contribute to the project anonymously.

The other reason that they should have been more anonymous is because the founders hold governance tokens and they are making profit from the usage of this opensource mixer. The government does not want to encourage the creation of a decentralized organization the profits from criminal activity because presently it is easy to create by using smart contracts, blockchain and DeFi.

[o_e_l_e_o]

perhaps lead to an attempt of a final ban on crypto?

I don't think the US government at least will go down the route of an outright crypto ban. It is much more lucrative for them, both in terms of taxation and data harvesting, to instead pass the most ridiculous regulations which require all bitcoin to be fully KYCed. First it will be banning non-KYC trading, then it will be mandating that all withdrawal addresses from exchanges are linked to KYC data (such as the AOPP proposal), and then it will be mandating that all bitcoin is only stored on regulated KYC exchanges and you are not allowed to withdrawal it at all. I'm sure I don't need to point out how we should fight back against this nonsense as strongly as possible.

Does he return to the original victims?

Ha! Suggesting the government might actually care about the victims! Good one! No, the government simply keep it for themselves or auction it off.

What the Tornado Cash founders appear to have done wrong is if they wanted to develop opensource software that might be cracked down by the government, they should have done this more anonymously similar to what Satoshi has done when he began developing bitcoin.

Or they should have bought out our politicians like the fiat banks do. That gives them a free pass to launder trillions.

[dkbit98]

What the Tornado Cash founders appear to have done wrong is if they wanted to develop opensource software that might be cracked down by the government, they should have done this more anonymously similar to what Satoshi has done when he began developing bitcoin. This is not only good for security, it will also encourage more developers to contribute to the project anonymously.

Developers that work on shitcoins like ethereum usually never care much about privacy, that is strange thing to do especially if you are creating something that improves privacy.
I never hard of any large central bank being accused of money laundering, and this was not invented yesterday, that is why there are constant wars around the world, and everyone knows that.

[DaveF]

What the Tornado Cash founders appear to have done wrong is if they wanted to develop opensource software that might be cracked down by the government, they should have done this more anonymously similar to what Satoshi has done when he began developing bitcoin. This is not only good for security, it will also encourage more developers to contribute to the project anonymously.

Developers that work on shitcoins like ethereum usually never care much about privacy, that is strange thing to do especially if you are creating something that improves privacy.
I never hard of any large central bank being accused of money laundering, and this was not invented yesterday, that is why there are constant wars around the world, and everyone knows that.

Central banks, not many. Commercial banks there have been a bunch over the years.

https://sanctionscanner.com/blog/the-five-biggest-money-laundering-scandals-317

The problem comes back to big banks have 1000s if not 10s of 1000s of employees. You can find that this one or that one is doing something wrong. But proving who knew what and when they knew it is difficult.
If an order comes down that says we need to make these numbers in revenue and people panic about their jobs and look the other way is one thing.
Having an order come down that says we need to make these numbers in revenue and do whatever it takes to do it, is another.
And most people that high up know not to say do whatever it takes in any way that could come back to them.
The government can harass a corporation, it can fine a corporation, it can even shut it down. But you can't lock it up.

People you can lock up. So when you have a small target, like 2 people, then you can go after them.

-Dave

[bbc.reporter]

On the news about the Lazarus Group and how the American government is using this for fud and fear tactics, It appears we have another one. The FBI identified that it was the Lazarus Group that hacked stake.com. I shake my head. I am not implying that this is fake news, however, anything can be blamed on North Korea.



The FBI is issuing this release to warn the public regarding the theft of approximately $41 million in virtual currency from Stake.com, an online casino and betting platform. The FBI has confirmed that this theft took place on or about September 4, 2023, and attributes it to the Lazarus Group (also known as APT38) which is comprised of DPRK cyber actors. 

Source https://www.fbi.gov/news/press-releases/fbi-identifies-lazarus-group-cyber-actors-as-responsible-for-theft-of-41-million-from-stakecom



There are also other articles that say these hacked cryptocoins are being used for funding North Korea's nuclear missile program.

[bbc.reporter]

Privacy is not a crime. However, it appears that if a person uses a mixer or a something similar to Tornado Cash, the government can call it moneylaundering even if you only want to hide your cryptocoins in a personal private wallet. I wish the Dutch prosecutors will lose in this trial.

The trial will begin on March 26.



Alexey Pertsev, the Tornado Cash developer who has become a symbol of state overreach on crypto crime, laundered more than $1.2 billion in dirty money, according to an indictment by Dutch prosecutors obtained by DL News.

Pertsev, who is scheduled to stand trial in the Dutch city of ‘s-Hertogenbosch beginning March 26, “made a habit of committing money laundering,” according to the three-page document, which was written in Dutch and was revealed Tuesday.

Pertsev has denied he violated money laundering laws ever since he was arrested in August 2022.

“Prosecutors are suspecting Pertsev of money laundering and they have described it in a general way, but they don’t specify which exact acts he has committed to take part in the criminal offence,” Keith Cheng, Pertsev’s lawyer, told DL News Tuesday

Read in full https://www.dlnews.com/articles/people-culture/alexey-pertsev-accused-of-laundering-1bn-at-tornado-cash/