Tornado Cash embattled after sanctions, arrest [53]
Chilling repercussions for the crypto industry after Tornado Cash targeted
Good afternoon, friends!
The news has already hit the media that Ethereum mixing service Tornado Cash has been targeted by the US Treasury with sanctions and a man, identified as developer Alexey Pertsev, has been arrested by Dutch authorities.
As a decentralized service, Tornado Cash cannot be stopped by state actors, of course, but this has had some chilling repercussions as wallets were frozen by Circle, Alchemy, and Infura.
The US sanctions claim that the issue with Tornado Cash is that its privacy service may be used to launder the proceeds of criminal enterprise and that it had not done enough to prevent this. The counterargument is that it cannot do much to prevent that without preventing legitimate traffic through its service.
In order to reveal senders and recipients and follow “Know Your Customer” anti-money laundering rules, it would have to break the privacy of people using the service. Which would mean that it wouldn’t operate as a privacy mechanism for funds.
The sanctions themselves, however, as code repository GitHub also removed the account for the virtual currency mixing service. The company may have had no choice under US law. However, what happened next is questionable: it also suspended the accounts of three developers who contributed to the repo including Roman Semenov, Roman Storm, and Alexey Pertsev.
This raised the question of why GitHub chose to suspend their accounts in relation to their participation with Tornado Cash. It’s not against the law for them to contribute to Tornado Cash. Instead, GitHub chose to chill their speech, even though they were not named in the sanctions.
Of course, as a private company, GitHub is free to suspend user accounts according to its own Terms of Service (or whims) without regard to freedom of speech.
This act becomes even more chilling in regards to the news that Dutch authorities then arrested a then unnamed 29-year-old man in Amsterdam identified as a Tornado Cash developer. That man was identified as Alexy Pertsev, confirmed by his wife on Friday. He was accused of “facilitating money laundering through the mixing of cryptocurrencies,” according to a release from investigators.
As multiple arrests were not ruled out, this could mean that other developers or others participating with Tornado Cash could still be in trouble.
This is the first time that the US government has sanctioned a piece of software. Ordinarily, the US Treasury targets people, companies, and governments – all entities that are made up of people. While it’s true that the software itself is a device that can be used by criminals, it also has legitimate uses.
In fact, before it was sanctioned by the US Treasury, Ethereum co-founder Vitalik Buterin said that he used the service to donate crypto to Ukraine to assist in their efforts to deal with the Russian invasion.
As usual, more news is available after the fold and the news of the week after the fold. Keep it tuned here for even more! We’ve got more coming next week.
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Blockchain Bulletin
Tornado Cash mixer sanctioned by US, dev arrested in Netherlands. A dev working on the Tornado Cash mixer was arrested by Dutch authorities in Amsterdam suspected of “facilitating money laundering,” after the service was sanctioned by the US, reported Bitcoin.com News.
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