The Netherlands has arrested Tornado Cash, a suspected developer of Ethereum-mixing service Tornado Cash. More arrests are “not ruled out.”
Today, the Netherlands Crime Agency (FIOD), announced that it had arrested a “suspected designer” of Tornado cash, the Ethereum-centric mixed service sanctioned earlier this week by the U.S. Treasury.
On Wednesday, 10 August 2018, a 29-year old man was arrested by the FIOD in Amsterdam. The suspect is accused of helping to conceal criminal financial flows and facilitate money laundering through the mixing cryptocurrency through the Tornado Cash decentralized Ethereum mixing service,” the agency stated in a statement.
FIOD stated that the suspect was brought to the examining judge today, and that multiple arrests cannot be ruled out.
FIOD stated that Tornado Cash was the subject of a criminal investigation by the Financial Advanced Cyber Team, which is part the agency.
FACT suspects Tornado Cash was used by the criminal finance industry to hide large-scale criminal cash flows. This includes (online) thefts from cryptocurrencies (so called crypto hacks or scams). The statement stated that funds were stolen by hackers belonging to a group thought to be linked with North Korea.
Tornado Cash was launched in 2019. It is a privacy tool that hides the origin of Ethereum transactions. This is done by pooling large amounts of transactions together and mixing them to make it impossible to track them on the public blockchain.
However, Tornado Cash’s privacy has been a source of concern for authorities who are often concerned about the possibility that it is being used to launder money or other illegal activities.
The U.S. Treasury Department added Tornado Cash, along with a bunch of addresses that are associated with the service, to its Specially Designated Nationals List on Monday. This effectively prohibited Americans using the tool or transacting with those addresses.
The Treasury justified this move by citing numerous examples in which Tornado Cash was used to launder money by organizations such as the North Korean state-sponsored hacking group Lazarus Group.
Since then, the Tornado Cash website has been unavailable. The project’s last tweet was Tuesday, when it shared the list of companies that have complied with this ban.
These include the financial company Circle, GitHub which removed Tornado Cash’s source code from its platform, Alchemy and Infura and the decentralized exchange dYdX which started blocking addresses that were associated with the service.
Many prominent figures from the crypto industry condemned Treasury’s decision in the days that followed. They also decried the ban as not only illegal but as a threat to user privacy.
Vitalik Buterin was one of them. He stated that he used the blacklisted services to make donations to Ukraine. Ukraine has been fighting Russian invasion since February.
Buterin claims that he used Tornado Cash to protect the recipients and not himself.