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Developer of Tornado Cash gets jail sentence for laundering billions of dollars in cryptocurrency

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Developer of Tornado Cash gets jail sentence for laundering billions of dollars in cryptocurrency

 

's-Hertogenbosch, 14 mei 2024

The district court of Oost-Brabant has sentenced a 31 year old Russian, residing in Amstelveen, to an imprisonment of 5 years and 4 months. The court ruled that the man developed and maintained a software tool, called Tornado Cash, with which in total over 2 billion U.S. dollars was laundered.

Tornado Cash was created by the defendant and 2 other people. The defendant further developed the tool from July 2019 until his arrest in August 2022. Tornado Cash works with so called 'pools'. These are a kind of collection bins that accept deposits of cryptocurrency from one wallet address and make withdrawals possible from another. By doing this, Tornado Cash terminates the transaction trail on the so called blockchain and hides the origin of the cryptocurrency, the actual owner and the destination of the cryptocurrency. Tornado Cash makes a complete anonymous deposit and withdrawal possible from Tornado Cash, thereby concealing or disguising the person who has the actual control over the cryptocurrency; in other words: who owns the cryptocurrency. 

Research shows that 1.2 billion U.S. dollars were laundered this way in so called Ether (a cryptocurrency). These Ether are derived from 36 different thefts (hacks). Because of the used parameters in selecting these hacks, 36 is the lower limit. Without using these parameters it becomes clear that 2.2 billion U.S. dollars, proceeding from criminal Ether, have been laundered. Furthermore, the court does not rule out that cryptocurrency has also been laundered deriving from other crimes. 

Responsibility founders

The defendant declared that it was never his intention to break the law or to facilitate criminal activities. With Tornado Cash, he wanted to offer a legitimate solution for a growing need for privacy in the crypto community. According to him it is up to the users not to abuse Tornado Cash. And besides, it was impossible for him to prevent the abuse because of the technical specifications of Tornado Cash. 

The court disagrees. It was Tornado Cash that executed the concealing and disguising activities, previously described. When executing these activities with cryptocurrency derived from crime, Tornado Cash carries out money laundering activities. Therefore the court judges that Tornado Cash is not just a instrument for users.

Tornado Cash functions in the way the defendant and his cofounders developed Tornado Cash. So the operation is completely their responsibility. If the defendant had wanted to have the possibility to take action against abuse, then he should have built it in. But he did not. Tornado Cash does not pose any barrier for people with criminal assets who want to launder them. That is why the court regards the defendant guilty of the money laundering activities as charged.

Common knowledge

The defendant was also aware of the fact that his tool was being used for money laundering activities. It is of common knowledge that a ‘cryptomixer’, or similar services like Tornado Cash, are used for money laundering of cryptocurrency. The defendant was active in several chat groups. In those chat groups they discussed the hacks in which Ether had been stolen. They also discussed cryptocurrency with a criminal origin being deposited into Tornado Cash. 

This did not refrain the defendant from developing Tornado Cash and offering it to the public without restrictions (for example by incorporating measures). On the contrary, until his arrest, he kept on developing Tornado Cash. Every next step enhanced the concealing effect and anonymity of the users. The defendant accepted the risk of the simple, unlimited, foreseeable, and evident use by criminals.

No legitimate tool

Tornado Cash combines maximum anonymity and optimal concealment techniques with a serious lack of functionalities that make identification, control or investigation possible. Tornado Cash is not a legitimate tool that has unintentionally been abused by criminals, as the defendant presents. Tornado Cash suits criminal use.

The defendant and his co-perpetrators developed the tool in such a manner that it automatically performs the concealment acts that are needed for money laundering. The criminal user is fully being taken care of. The user asks, Tornado Cash runs, without asking questions. 

Because of the development and the launch of Tornado Cash, the defendant and his co-perpetrators were of great value to the underworld. The low point being the ‘Axie Infinity hack’ by the Lazarus Group when cryptocurrency was stolen with a value of 625 million U.S. dollars. And of that amount, almost 450 million dollars were deposited in Tornado Cash and laundered.

Shortcut

With Tornado Cash, the defendant created a shortcut for financing crimes and terrorism. Under the pretense of an ideology, he did not care about law and regulations and felt untouchable. He also behaved lazily when victims of hacks or investigative authorities reported to him, simply stating that he could not do anything for them. He continued the development and exploitation of Tornado Cash with blinders on. He chose to look away from the abuse and did not take any responsibility.

The court follows the prosecutor's demand and sentences the defendant to an imprisonment of 5 years and 4 months. De court also ruled that the Porsche which had been seized and cryptocurrency with a value of about 1.9 million euros, will not be returned to the defendant. 

Verdict

    ECLI:NL:RBOBR:2024:2069

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