Resurgence of Deposits in Sanctioned Crypto Mixer Tornado Cash Raises Concerns

The volume of new deposits into the OFAC-sanctioned crypto mixer Tornado Cash surged significantly in the first half of 2024, indicating a notable resurgence. Despite facing sanctions and legal challenges, the banned crypto mixer witnessed an unexpected uptick in deposit volume, with data from Flipside Crypto revealing a staggering $1.9 billion in deposits during the first six months of the year. This figure represents a 50% increase compared to the total deposits made throughout 2023.

The Office of Foreign Assets Control (OFAC) had imposed sanctions on Tornado Cash in August 2022 after it was discovered that the North Korean hacking group Lazarus Group had utilized the protocol to launder approximately $455 million in illicit funds. The blacklisting of wallets associated with Tornado Cash by OFAC meant that interacting with the protocol could result in difficulties in withdrawing crypto into fiat from compliant exchanges. Despite these challenges, the mixing service remains a favored destination for large hacking groups looking to obscure the trail of ill-gotten funds.

Efforts to challenge the Tornado Cash sanctions are ongoing through a lawsuit filed in 2022 by industry figures and supported by various crypto firms and advocacy groups. The US Treasury, however, maintains that crypto mixers pose a national security threat, citing concerns over money laundering controls. The three co-founders of Tornado Cash have also faced legal troubles, with one sentenced to prison on money laundering charges in 2023, another arrested in the US on similar charges, and the third co-founder currently evading authorities.