A 29-year-old man has been arrested in Amsterdam for his alleged involvement in the development of Tornado Cash – a crypto-mixing service banned by the US Treasury earlier this month for its role in large-scale money laundering hacking operations, including those related to state-sponsored North Korean cybergangs.
News of the arrest was announced by the Dutch Fiscal Information and Investigation Service (FIOD), which investigates financial crimes in the country. FIOD said the person was “suspected of involvement in concealing criminal financial flows and facilitating money laundering” and that “multiple arrests are not excluded” as the investigation into Tornado Cash continues. The suspect is scheduled to appear before an examining magistrate today.
Crypto mixers aren’t doing enough to root out money laundering, authorities say
The arrest in Amsterdam marks an escalation in the crackdown on Tornado Cash and other crypto-mixers by global authorities. Such services work by pooling contributor funds and then reallocating them, making it harder for law enforcement to track the digital breadcrumbs that accompany cryptocurrency transactions.
The argument from institutions like the US Department of Treasury (DOT) is that these companies have not addressed their use as illegal money laundering services. Earlier this year, the DOT added another crypto blender, Blender.io, to its sanctions list after discovering the service was also being used by North Korean hacking groups.
The response from proponents is that crypto mixers provide an extra layer of privacy when conducting transactions, thereby fulfilling an important aspect of cryptocurrency idealism.
For example, in response to the sanctions against Tornado Cash, crypto advocacy group Coin Center said the US government was wrongly targeting a “tool that is neutral and can be used like any other technology for good or ill.”
“It’s not a specific bad actor that’s being sanctioned, it’s all Americans who want to use this automated tool to protect their own privacy,” Coin Center’s Jerry Brito and Peter Van Valkenburgh wrote in a blog post.
On Twitter, a user suggested that donations to Ukraine are an example of a financial transaction that they want to hide from authorities for the safety of both the sender and recipient. In response to this post, Vitalik Buterin, co-founder of Ethereum said he had used Tornado Cash “to donate to that very cause.”
I will come out as someone who used TC to donate to this very cause.
— vitalik.eth (@VitalikButerin) August 9, 2022