On August 23, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Roman Semenov, co-founder of previously sanctioned decentralized Ethereum mixer Tornado Cash. On the same day, the U.S. Department of Justice (DOJ) charged and arrested Semenov and fellow co-founder Roman Storm for conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business, and conspiracy to commit sanctions violations. These designations came two days after a federal judge ruled that Tornado Cash is a distinct entity that can be sanctioned.
Tornado Cash was sanctioned in August 2022 for facilitating the laundering of more than $455 million worth of cryptocurrency stolen by Lazarus Group from various decentralized protocols. However, this is the first time a Tornado Cash team member has been charged by the United States or sanctioned by OFAC. We’ll explore more below.
Details of Semenov’s and Storm’s sanctions and charges
Roman Semenov, a Russian citizen, and Roman Storm, a resident of Auburn, Washington, co-founded Tornado Cash with Alexey Pertsev in 2019. The purpose of Tornado Cash was to provide users with a decentralized platform through which to mix cryptocurrency, thus obscuring transaction sources and history. According to the press release, both Semenov and Storm actively promoted Tornado Cash to users and profited significantly from its operations. During the course of Tornado Cash’s operations, Semenov and Storm helped launder more than $1 billion in ill-gotten funds. Today’s announcements by OFAC and DOJ indicate that the Tornado Cash team knew their protocol had been used by Lazarus Group to launder stolen funds, but made insufficient efforts to address this activity.
Soon after the sanctions designation and charges were announced, Storm was arrested by the Federal Bureau of Investigations (FBI) and the Internal Revenue Service, Criminal Investigation division (IRS-CI). Pertsev was previously arrested in August 2022 by Dutch law enforcement after being accused of money laundering. OFAC’s designation indicates that Semenov is currently located in Dubai.
Semenov’s associated addresses
OFAC identified the following cryptocurrency addresses as associated with Semenov in his SDN list designation:
As a result of Semenov’s designation under the CYBER2 and DPRK3 programs, exposure to any of the eight addresses pose secondary sanctions risks.
How Chainalysis helps protocols reduce illicit activity
The Tornado Cash saga illustrates how important it is for DeFi protocol builders to take all steps possible to detect and reject addresses associated with bad actors. The Chainalysis compliance suite can help, with solutions ranging from a free on-chain oracle that automatically screens and blocks addresses associated with sanctioned entities, to our real-time transaction monitoring services.
We have labeled all addresses relevant to Semenov’s on-chain activities in Chainalysis products and will continue to provide updates on the situation when possible.
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