A man who allegedly developed Tornado Cash, a cryptocurrency protocol sanctioned by the Treasury Department for anonymizing transactions that is thought to be used extensively for money laundering, was arrested in Amsterdam.
The Netherlands’s Fiscal Information and Investigation Service said Friday that it had arrested a 29-year-old man involved in the development of Tornado Cash. This cryptocurrency protocol allows users to submit some of their cryptocurrency and receive it back from different addresses, thus muddling up the tracking of currency transactions. The Treasury Department sanctioned the protocol on Monday due to it being used by foreign entities such as North Korean hackers for laundering.
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The man was “suspected of involvement in concealing criminal financial flows and facilitating money laundering,” according to the Fiscal Information and Investigation Service.
The Amsterdam arrest appears to escalate international pressure against the protocol and other cryptocurrency mixers. The Fiscal Information and Investigation Service noted that “multiple arrests are not ruled out” as investigations into the cryptocurrency entity continue.
Tornado Cash has been a standard tool for hiding the theft of cryptocurrency, according to research from the blockchain intelligence firm TRM Labs. While an assortment of people uses the protocol for legal purposes, its connections to specific criminal organizations have recently increased scrutiny. The protocol is believed to have been used by North Korean hackers such as the Lazarus Group to launder the cryptocurrency assets it stole from the Ronin blockchain.
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The FBI blames North Korea for stealing $620 million from the Ronin blockchain in April, the largest cryptocurrency theft to date. An estimated 18% of ethereum placed within Tornado Cash in recent months came from the Ronin hack, according to data released by the cryptocurrency firm Nansen.
Industry figures have said that the Treasury Department’s decision to sanction Tornado Cash may set a dangerous precedent for cryptocurrency.
