Financial crime authorities in the Netherlands announced Friday that they had arrested a 29-year-old man who is suspected of being a developer for Tornado Cash, a cryptocurrency mixing service that was sanctioned by the U.S. earlier this week.
The Fiscal Information and Investigation Service (FIOD) — part of the Dutch Ministry of Finance — said it had detained the unnamed individual in Amsterdam on Wednesday, adding that additional arrests “are not ruled out.” The man is accused of “concealing criminal financial flows and facilitating money laundering” through his involvement with Tornado Cash, FIOD said.
The arrest comes just days after the U.S. blacklisted Tornado Cash and accused it of laundering billions of dollars since 2019, including $455 million stolen by the North Korea-linked Lazarus Group.
“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in a statement. “Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”
The sanctions and arrest highlight the growing pressure being put on cryptocurrency mixing services, which conceal the source of digital assets by pooling funds together and distributing them to clients in a randomized way.
FIOD said money laundering via mixers and similar services “is a new phenomenon that is receiving explicit attention” from financial crime authorities.
In May, the U.S. Treasury Department sanctioned Blender.io for its role in concealing more than $20 million in proceeds from the attack on Ronin Network, which was also attributed to Lazarus. That action was the first time a mixing service faced sanctions.
The sanctions have led a number of other firms, like GitHub and Circle, to suspend or remove accounts linked to the organizations.
My @GitHub account was just suspended— Roman Semenov ️ (@semenov_roman_) August 8, 2022
Is writing an open source code illegal now?
The actions have attracted criticism from some cryptocurrency entrepreneurs and privacy advocates, who argue that writing code should be protected as a form of free speech.
Financial crime authorities argue that the developers behind Tornado Cash and other mixing platforms “have made large-scale profits from these transactions” with Lazarus Group and other cybercriminals, FIOD said.
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