Rally Organised for Tornado Cash Developer Arrested by Dutch Authorities

Key Insights:

• Alexey Pertsev is suspected to be involved in money laundering through Tornado Cash.
• The Dutch Fiscal Information and Investigation Service began its criminal investigation in June this year.
• Decentralised finance aggregator 1inch has organised a rally in Amsterdam to show support for Pertsev.

Last week, the Dutch Fiscal Information and Investigation Service (FIOD) arrested a 29-year-old man suspected to be involved in money laundering through the crypto mixing service Tornado Cash.

The service was sanctioned by the U.S. government earlier this month following allegations that Tornado Cash was helping to conceal billions in capital flows, including for North Korean hackers.

FIOD Investigation

According to a statement from the Fiscal Information and Investigation Service, which began its criminal investigation in June this year, Dutch prosecutors are investigating the matter on suspicions of fraud, environmental crime and asset confiscation.

There was speculation online that the arrested developer was Alexey Pertsev and this was subsequently confirmed by his wife Ksenia Malik.

Malik, who has been prohibited from speaking with her husband as he was put behind bars, has confirmed that Pertsev remains in the hands of Dutch authorities. The Fiscal Information and Investigation Service is an agency responsible for investigating financial crimes in the Netherlands.

In response to the arrest, decentralised finance (DeFi) aggregator 1inch has organised a rally in Amsterdam to show support for Pertsev and to stand for developers’ rights to create open source software. The rally will be held on August 20, 2022.

Large-scale Criminal Money Flows

According to FIOD’s Financial Advanced Cyber Team (FACT), Tornado Cash has allegedly been used to conceal large-scale criminal money flows, including crypto hacks and scams.

The news of Pertsev’s arrest came shortly after the United States Treasury Department placed numerous Tornado Cash addresses on the sanctions list of the Office of Foreign Asset Control (OFAC). This is despite the company recently announcing that it had fully open-sourced its user interface code and added a compliance tool that allowed users to show the source of any transaction.

More specifically, 44 cryptocurrency addresses allegedly connected to the controversial mixer were added to the Specially Designated Nationals and Blocked Persons (SDN) and all U.S. persons and entities have been banned from using the tool or any of the Ethereum (ETH) wallet addresses tied to the protocol. Penalties for violating this range from fines of $50,000 to $10,000,000 and 10 to 30 years imprisonment.

The U.S. Treasury Department alleges that individuals and groups have used the mixer to launder more than $7 billion worth of crypto since 2019. The decentralised crypto mixing service has even been utilised by Lazarus Group, a North Korean hacking collective linked to the $625 million hack of Axie Infinity’s Ronin Network. It is suspected that tens of millions of dollars’ worth of crypto stolen from Ronin flowed through Tornado Cash.

After the U.S. Treasury Department’s announcement, Circle, the issuer of the USD Coin (USDC) stablecoin, froze over 75,000 USDC worth of funds linked to the 44 Tornado Cash addresses.

OFAC, a watchdog agency tasked with enforcing economic and trade sanctions based on U.S. foreign policy and national security, previously sanctioned Blender.io for allegedly laundering proceeds from ransomware attacks, as well as about $20.5 million in crypto stolen from Ronin.