The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury placed sanctions on the virtual currency mixer Tornado Cash earlier this month after discovering that it had been used to launder virtual money.
For the crypto-verse, the past few months have been more than just dramatic. The beginning of the bear market, the demise of Terra, the numerous bankruptcy filings, and the removal and detention of Alexey Pertsev, the creator of the cryptocurrency mixer Tornado Cash.
The majority of the crypto sector was outraged by this episode. Many pointed out that while Pertsev was arrested for only supporting decentralization, the developers behind fraudulent enterprises were still free to operate. Centralized systems were criticized by the crypto community as being unprepared for the degree of decentralization they offered. But it now appears that there was a much more significant motive for the arrest.
According to a recent study compiled by the intelligence agency Kharon, Pertsev had previously worked for a business connected to the Russian security agency FSB. It should be mentioned that Tornado Cash runs on software created by PepperSec, a company registered in Delaware.
Nick Grothaus, vice president of research at Kharon, commented on the issue as follows,
“You had this guy working for [Digital Security OOO] and doing pen testing himself, and then Treasury designated the company for helping the FSB’s hacking capabilities.”
It should be mentioned that this year saw the highest utilization of crypto mixers ever. Russian cybercriminal groups sent exceptionally large sums of money to mixers.
Tornado cash credibility in question
As was already mentioned, the arrest appeared to involve much more than just an open-source platform. The Center for a New American Security’s adjunct senior fellow Alex Zerden made the following observation regarding the same,
“This opens up a lot of credibility issues for the developers of Tornado Cash. This is pretty profound information that informs why the U.S. government and Dutch authorities have taken certain actions. There seems to be a more complex and complicated picture that takes more time to unravel.”
The public has been outraged by Pertsev’s detention. According to reports, protesters gathered in Amsterdam to call for the Tornado Cash developer’s release. Several people continued to shout, “Open source [code] is not a crime.” Pertsev’s connection to Russia, as Zerden said, may lead to greater opportunities in the case.