Crypto Mixer Tornado Cash Sees Resurgence Despite Ongoing Sanctions

Tornado Cash, the “crypto-mixing” protocol, has seen a resurgence in 2024 after a significant decline in activity following US government sanctions two years ago.

The sanctions, imposed by the Office of Foreign Assets Control (OFAC) in August 2022, initially led to a drop in monthly deposits to Tornado Cash, with activity dropping by more than 90%.

Tornado Cash sees $1.9 billion in deposits in the first half of 2024

However, recent data from blockchain analytics firm Flipside Crypto shows that the protocol received more than $1.9 billion in deposits in the first half of 2024 alone, a 50% increase over total deposits throughout the 2023.

Recently, the service has experienced large inflows from hackers involved in major exploits. According to Arkham Intelligence, the Poloniex exchange hacker, who stole more than $100 million last year, transferred $76 million to Tornado Cash in the past two months.

Similarly, HECO Bridge and Orbit Chain operators moved $166 million and $47.7 million into the mixer this year. This is because the decentralized nature of Tornado Cash has made it difficult for US authorities to effectively regulate its use.

Designed to maintain privacy, a core tenet of the decentralized crypto space, the protocol mixes funds from multiple transactions before redistributing them, thereby hiding their original sources. This emphasis on privacy, in turn, has made Tornado Cash an attractive option for people looking to launder illicit funds.

Resurgence of mixing services

In a recent report, Blockchain analytics firm Chainalysis also noted an overall increase in market activity and a resurgence in the service mix in 2024.

“If we look at the growth of individual mixing services overall, we see that WasabiWallet, JoinMarket and Tornado Cash have grown the most,” the report said.

In August 2022, OFAC sanctioned Tornado Cash after discovering that the North Korean hacking group Lazarus had used the protocol to launder approximately $455 million in illegal funds.

The OFAC sanctions require anyone participating with Tornado Cash to be placed on a “blacklist,” preventing their wallet from being accepted on any law-abiding cryptocurrency exchange.

The sanctions have also led to significant legal and regulatory challenges for Tornado Cash co-founders Alexey Pertsev, Roman Storm and Roman Semenov. In 2023, Alexey Pertsev was sentenced to five years and four months in a Dutch prison after being convicted of money laundering.

Roman Storm was arrested on similar charges in the US in August and pleaded not guilty. He was released on $2 million bail and has since filed a motion to dismiss all charges on March 31. The third co-founder, Roman Semenov, remains at large.

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