Alexey Pertsev, the developer of the cryptocurrency mixing service Tornado Cash, has been found guilty of money laundering by a Dutch judge. He faces a potential 64-month prison sentence as requested by the prosecutors. Pertsev is accused of aiding in the laundering of $1.2 billion worth of cryptocurrency during the operation of the mixer.
Tornado Cash is a decentralized non-custodial privacy solution that obfuscates the source of cryptocurrencies. It uses smart contracts to allow users to deposit cryptocurrency, such as ETH, and withdraw it from multiple addresses, breaking the link between the deposit and withdrawal addresses. This process enhances transaction privacy by making it difficult to trace the sender’s identity.
When a user deposits crypto into Tornado Cash, a secret hash is created, and the protocol admits the deposits and the hash through a process known as commitment. During withdrawal, the user must input the secret hash to prove ownership while maintaining on-chain anonymity.
The accused was first arrested in the Netherlands in August 2022, two days after the U.S. Treasury Department sanctioned Tornado Cash for allegedly helping criminals conceal transactions. After pleading guilty, he argued that he was being unfairly persecuted for writing software.
Pertsev has been restricted to the Netherlands and monitored with a GPS device while awaiting the verdict. The judge’s ruling will determine if Pertsev faces prison time for his role in developing Tornado Cash although Pertsev’s lawyers have 14 days to appeal the ruling.
Tornado Cash has been linked to several high-profile cybercrimes, including the $625 million hack of Axie Infinity’s Ronin Bridge by the North Korean hacking group Lazarus. Authorities claim the platform has processed over $7 billion in illicit funds since its launch.
Several prominent figures in the cryptocurrency industry have faced legal action this year. Changpeng Zhao, co-founder of Binance, was sentenced to 4 months in prison for violating U.S. banking laws, while Sam Bankman-Fried, co-founder of FTX and Alameda Research, received a 25-year prison sentence for wire fraud and conspiracy.
Additionally, Keonne Rodriguez and William Lonergan Hill, co-founders of Samourai Wallet, have been charged with operating an unlicensed money-transmitting business, allegedly processing over $2 billion in illegal transactions and laundering over $100 million in criminal proceeds.
These developments highlight increasing regulatory scrutiny in the industry, emphasizing the need for proactive compliance measures by web3 firms.
