Circle Freezes Funds Linked to Tornado Cash Addresses

The decentralized crypto-mixing service Tornado Cash is legally prohibited for use by all American residents, according to the U.S. Treasury Department.

The Office of Foreign Asset Control (OFAC) has added more than 40 cryptocurrency addresses to its list of Specially Designated Nationals and Blocked Persons (SDN). These addresses are purportedly linked to the contentious mixer (OFAC). Circle has taken action to freeze cash connected to Tornado Cash addresses as a result of this.

Sanctions

The USD Coin (USDC) stablecoin's issuer, Circle, decided to freeze over 75,000 USDC worth of cash related to 44 Tornado Cash addresses that were sanctioned by OFAC's Specially Designated Nationals and Blocked Persons list in response to the Treasury Department's statement.

In order to protect national security, foreign policy, and the economy, the Office of Foreign Assets Control is a watchdog organization that enacts trade and economic sanctions based on American foreign policy. As a result of the recent OFAC decision, no U.S. individuals or organizations are permitted to use the Tornado Cash tool or any of the Ethereum (ETH) wallet addresses connected to the protocol. Those who do so risk facing legal repercussions.

Fines of $50,000 to $10,000,000 and jail terms of 10 to 30 years are the possible penalties. It would be prohibited to use or download its software, participate in the project, access its website, or deposit into or withdraw from smart contracts.

Currently, the Tornado Cash smart contract addresses hold assets valued at around $437 million, including wrapped Bitcoin (WBTC), Ethereum, and stablecoins. Issuers are now required to follow the directive from OFAC in order to stop the sale or redemption of such assets.

money-transfer fraud

Tornado Cash has caused a stir since it is a virtual money mixer that is used to hide transactions. Even though the business said last month that it had completely open-sourced its user interface code and introduced a compliance feature that enabled users to disclose the source of each transaction, this is still the case.

According to the U.S. Treasury Department, since 2019 individuals and organizations have allegedly used the mixer to launder more than $7 billion in cryptocurrency. Lazarus Group, a North Korean hacker group connected to the $625 million Ronin Network attack of Axie Infinity, has used Tornado Cash. In actuality, cryptocurrency taken from Ronin and transferred via Tornado Cash was worth tens of millions of dollars.

The Treasury Department said that Blender.io was used to launder money obtained via ransomware attacks, together with around $20.5 million in cryptocurrency (including 173,600 ETH and 25.5 million USDC) taken from Ronin.

Additionally, a series of recent decentralized finance (DeFi) vulnerabilities, including a $375 million assault on Wormhole and a $100 million compromise on Horizon Bridge, have brought Tornado Cash additional media attention.