A 29-year-old man has been arrested in Amsterdam for his suspected involvement in the development of Tornado Cash — a crypto mixer service that was banned earlier this month by the US Department of the Treasury for its role in laundering money from large-scale hacking operations, including those linked to state-sponsored North Korean cybergangs.
News of the arrest was announced by the Netherlands’ Fiscal Information and Investigation Service (FIOD), which investigates financial crime in the country. FIOD said the individual is “suspected of involvement in concealing criminal financial flows and facilitating money laundering,” and that “multiple arrests are not ruled out” as investigations into Tornado Cash continue. The suspect is due to appear before an examining judge today.
The arrest in Amsterdam marks an escalation in global authorities’ crackdown against Tornado Cash and other crypto mixers. Such services operate by pooling together contributors’ funds and then redistributing them, making it harder for law enforcement to track the digital breadcrumbs that accompany cryptocurrency transactions.
The argument made by institutions like the US Department of the Treasury (DOT) is that these companies have failed to address their use as illegal money laundering services. Earlier this year, the DOT added another crypto mixer, Blender.io, to its sanctions list after the service was also found to be used by North Korean hacking groups.
The response from advocates is that crypto mixers offer an additional layer of privacy when carrying out transactions, and so fulfill an important aspect of cryptocurrency idealism.
In response to the sanctions against Tornado Cash, for example, crypto advocacy group Coin Center said the US government was unfairly targeting a “a tool that is neutral in character and that can be put to good or bad uses like any other technology.”
“It is not any specific bad actor who is being sanctioned, but instead it is all Americans who may wish to use this automated tool in order to protect their own privacy,” wrote Coin Center’s Jerry Brito and Peter Van Valkenburgh in a blogpost.
On Twitter, one user suggested that making donations to Ukraine was an example of a financial transaction you might wish to hide from authorities, for the safety of both the sender and the recipient. In response to this post, Vitalik Buterin, co-founder Ethereum, said he had used Tornado Cash “to donate to this exact cause.”
I’ll out myself as someone who has used TC to donate to this exact cause.
— vitalik.eth (@VitalikButerin) August 9, 2022