The U.S. Treasury Department imposed sanctions on Tornado Cash, a cryptocurrency exchange that North Koreans have used for money laundering.
The sanctions prevent Americans from using Tornado Cash. The U.S. government claimed that the platform facilitated money laundering and terrorism financing. Cybercriminals used it to move around $7 billion worth of cryptocurrency.
Despite its public assurances, the Treasury Department said that Tornado Cash has failed to implement effective controls to prevent it from being used for money laundering. In a statement, Brian Nelson, the Under Secretary for Financial Intelligence, said that the platform still allows cybercriminals to carry out their illicit activities.
According to a report by TRM Labs, North Korea has been laundering about $1 billion of stolen funds through Tornado Cash.
The digital asset mixer is used to obscure the origin of funds. It was additionally involved in the Axie Infinity hack, which was carried out by a cybercriminal group based in North Korea.
The sanctions against Tornado Cash are a significant step in the United States' efforts to prevent money laundering through using cryptocurrencies. It also highlights the government's commitment to addressing the issue of money laundering through the use of social media platforms. Ari Redbord, government affairs and legal expert at TRM Labs, said that the sanctions could help authorities and regulators determine if the use of mixers is acceptable for laundering illicit funds.
Redbord also said that North Korea is a cash-poor country with a high risk of experiencing financial crises due to its lack of export revenue. Cryptocurrencies have a high potential for helping the country's bad actors fund their activities.
In April, Redbord told Reuters that North Korea's cybercriminal groups have been carrying out numerous online attacks. He also said that they've gotten more sophisticated over time.
According to Redbord, the rise of cryptocurrencies has created a new digital battlefield for nation-state actors. They're looking to disrupt the operations of crypto businesses to fund their weapons proliferation activities.
"Over the last year or so, we've moved from a post 9/11 world into a new digital battlefield," Redbord said. "Nation-state actors know to go after crypto businesses to fund real weapon proliferation. It's not just some hackers trying to fund a lifestyle."
Tornado Cash launders billions of dollars
During a press briefing, a senior Treasury official said that Tornado Cash has been laundering over $7 billion in virtual currency.
The official said that North Korea's Lazarus Group used Tornado Cash to launder about $455 million. It was also used to fund the attack on the cryptocurrency exchange platform known as the Harmony Bridge.
The U.S. previously accused the Lazarus Group of being involved in the theft of $625 million worth of cryptocurrency from the online sidechain known as the Ronin Network.
A spokesperson for Elliptic, a blockchain analytics platform, said that approximately $1.5 billion in criminal proceeds have been laundered using Tornado Cash. Elliptic indicated that the figure could be higher than the $7 billion that the Treasury cited.
The Treasury Department also said that hackers used Tornado to launder about $7.8 million of stolen cryptocurrency during the Nomad heist. During the incident, which took place last week, cybercriminals were able to steal $100 million worth of assets, including various cryptocurrencies such as Ethereum, Binance Coin, and Dai.
Aside from Tornado, other digital asset mixers have also been accused of facilitating illegal activities. In February last year, the U.S. Justice Department arrested a man who was involved in the laundering of $300 million through a service known as Helix.