---
tags: public, privacy, tornado-cash
---
# On the Tornado Cash Arrest
## What happened:
- On Monday, August 8 2022, the US Department of Treasury's Office of Foreign Assets Control (OFAC) sanctioned Ethereum-based cryptocurrency mixer Tornado Cash on grounds of its use in money laundering.
- OFAC also sanctioned any funds currently in the Tornado Cash, meaning any funds withdrawn on or after August 8th are to be "frozen", requiring any recipient of such funds to block and/or forfeit those funds, to avoid violation of OFAC sanctions.
- Since cryptocurrency transactions are unblockable, this ruling puts the onus on Ethereum users to verify that they have not received funds from a Tornado cash address.
- Stablecoin provider USDC Circle immediately complied by blocking all listed SDN Tornado Cash addresses.
- Github immediately removed the Tornado-cash organization from their site.
- Then on Friday, August 12 2022, Dutch authorities arrested 29-year old developer Alexey Pertsev on grounds of his suspected work on Tornado Cash.
([U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash | U.S. Department of the Treasury](https://home.treasury.gov/news/press-releases/jy0916))
([5 Things to Know About OFAC Sanctioning Crypto Mixer Tornado Cash](https://www.orrick.com/en/Insights/2022/08/5-Things-to-Know-About-OFAC-Sanctioning-Crypto-Mixer-Tornado-Cash))
([Official press release: Arrest of suspected developer of Tornado Cash - FIOD](https://www.fiod.nl/arrest-of-suspected-developer-of-tornado-cash/))

## Code is recognized as speech:
- Per the **cryptography wars** of 30 years ago, code is legally recognized as speech.
- In Daniel Bernstein v US 9th Circuit, 1999, the district court found that the Source Code was speech protected by the First Amendment.
- This was supported by the subsequent ruling that clarified,
> The fact that a medium of expression has a functional capacity should not preclude constitutional protection. Code is an expressive means for the exchange of information and ideas.
~ Junger v Daley (6th Circuit, 2000)
([Bernstein v. USDOJ (9th Cir. May 6, 1999)](https://archive.epic.org/crypto/export_controls/bernstein_decision_9_cir.html))
- The arrest of Alexey Pertsev, and the subsequent delisting of the Tornado Cash organization is in dangerous contradiction of that precedent.
> Thirty years of hard legal work to establish first amendment protections around software distribution, blown up in a day by Github/Microsoft.
~ Matthew Green https://twitter.com/matthew_d_green/status/1556766032882110464

## On prior arrests, and non-custodial mixers:
Not the first time a privacy application developer has been arrested.
- On April 28 2021, the US government arrested Roman Sterlingov, operator of the custodial Bitcoin Fog, a custodial Bitcoin mixer.
- On August 18 2021, Larry Dean Harmon pleaded guilty to operating another Bitcoin mixer, Helix, from 2014-2017.
These mixers were custodial: they took possession of user funds. Tornado Cash is non-custodial: not requiring an inetrmediate to take temporary ownership of funds.
([Individual Arrested and Charged with Operating Notorious Darknet Cryptocurrency “Mixer” | OPA | Department of Justice](https://www.justice.gov/opa/pr/individual-arrested-and-charged-operating-notorious-darknet-cryptocurrency-mixer))
([Ohio Resident Pleads Guilty to Operating Darknet-Based Bitcoin ‘Mixer’ That Laundered Over $300 Million | OPA | Department of Justice](https://www.justice.gov/opa/pr/ohio-resident-pleads-guilty-operating-darknet-based-bitcoin-mixer-laundered-over-300-million))

## On Coin Center's announcement
Yesterday (Aug 15 2022), Coin Center released a statement asserting that "[sanctioning Tornado Cash] potentially violates constitutional rights to due process and free speech, and that OFAC has not adequately acted to mitigate the foreseeable impact its action would have".
Their argument hinges on the issue of the applications non-custodial lack of agency after deployment:
> The Tornado Cash Entity [developers], which presumably deployed the Tornado Cash Application, has zero control over the Application today. Unlike Blender, the Tornado Cash Entity can’t choose whether the Tornado Cash Application engages in mixing or not, and it can’t choose which “customers” to take and which to reject.

They continue with reference to the 2019 FinCEN guidance (albeit noting that OFAC is not bound by FinCEN):
> In its [May 2019 guidance document](https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf) on virtual currency business models, the Financial Crimes Enforcement Network (FinCEN) draws a distinction between “providers of anonymizing services” (including “mixers”) and “anonymizing software providers”. They make it clear that _service_ providers are subject to Bank Secrecy Act Obligations while _software_ providers are not.

Coin Center concludes that, while the TC Entity is a person and subject to sanctions, sanctioning the application is novel, and contradicts previous DoT guidance.

([Analysis: What is and what is not a sanctionable entity in the Tornado Cash case - Coin Center](https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-entity-in-the-tornado-cash-case/))

## Assorted quotes:
### DoT OFAC statement exerpt:
[U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash | U.S. Department of the Treasury](https://home.treasury.gov/news/press-releases/jy0916)
> Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned virtual currency mixer Tornado Cash, which has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. This includes over $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea...Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them

> Tornado is being designated pursuant to E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a cyber-enabled activity originating from, or directed by persons located, in whole or in substantial part, outside the United States that is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States and that has the purpose or effect of causing a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain.
([Cyber-related Designation | U.S. Department of the Treasury](https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808))

### On precedent:
> The Treasury Department’s [action Monday against Tornado Cash](https://www.wsj.com/articles/u-s-sanctions-virtual-currency-mixer-tornado-cash-11659971832?mod=article_inline), a platform based on open-source, self-running software protocols, is unprecedented, crypto industry participants add, as the U.S. has [previously only sanctioned](https://www.wsj.com/articles/u-s-blacklists-mixer-used-to-launder-proceeds-from-axie-infinity-crypto-hack-11651873390?mod=article_inline) wallet addresses and centralized services.

### On block:
> a total of roughly $424.28 million in digital assets were blocked from transacting

### On laundering:
> The U.S. Treasury Department accused Tornado Cash, a so-called mixer platform that enables users to exchange cryptocurrencies with relative anonymity, of laundering billions of dollars in virtual currency, including $455 million allegedly stolen by North Korean hackers

> Tim Robinson, co-founder of Blockchain analytics firm Elliptic, said it found at least $1.5 billion in proceeds of crime such as ransomware, hacks and fraud, laundered through Tornado Cash
([U.S. Sanctions Crypto Platform Tornado Cash, Says It Laundered Billions - WSJ](https://www.wsj.com/articles/u-s-sanctions-virtual-currency-mixer-tornado-cash-11659971832?mod=article_inline))
([Tornado Cash’s Sanctions Show Shift in Crypto Regulatory Focus - WSJ](https://www.wsj.com/articles/tornado-cashs-sanctions-show-shift-in-crypto-regulatory-focus-11660336224))