Tornado Cash Co-Founder Roman Semenov Included on OFAC Sanctions List

In a statement released on August 23, OFAC announced on its website that it had included Roman Semenov, a Russian individual involved in the establishment of Tornado Cash, on a list of “specially designated nationals.”

OFAC documented all of his known email addresses along with his Ethereum (ETH) wallets.

Tornado Cash Co-Founders Charged with Money Laundering

Furthermore, the FBI and the IRS apprehended Roman Storm, another co-founder of the crypto mixer, on August 24. Both Semenov and Storm face charges of conspiracy to commit money laundering, conspiracy to run an unauthorized money-transfer business, and conspiracy to breach sanctions.

Wally Adeyemo, Deputy Secretary of the Treasury, stated that Semenov and Storm purportedly laundered hundreds of millions of dollars in stolen cryptocurrency on behalf of the Lazarus Group, which has ties to the North Korean regime led by Kim Jong Un.

Nearly a year prior, Semenov indicated that his GitHub account had been suspended. Around the same period, a Tornado Cash developer, Alexey Pertsev, was taken into custody by the Dutch Finance and Information Service. He was released nine months later, on April 26, 2023, and is currently awaiting trial for facilitating money laundering involving crypto assets.

Judge Supports OFAC

Semenov was added to OFAC’s list after a judge ruled in favor of the US Treasury on August 18 in the Tornado Cash lawsuit. In this case, Tornado Cash argued that OFAC exceeded its authority and jurisdiction when it prohibited the crypto mixer.

This action by OFAC represents a significant step in imposing penalties directly on Semenov, rather than solely on Tornado Cash as an entity.

In 2022, the agency imposed sanctions on Tornado Cash, asserting that hackers had laundered as much as $7 billion in stolen crypto assets through the platform. At that time, OFAC provided details on 45 ETH wallets that it claimed the crypto tumbler had utilized to facilitate the laundering of illicit funds.

The presiding judge determined that Tornado Cash could be sanctioned as it exhibited characteristics of a person, being composed of its founders, developers, and a decentralized autonomous organization (DAO) that governed it.

The blacklisting of Tornado Cash resulted in a prohibition for US citizens from utilizing the service.

Indictments Contradict FinCEN Guidance

Following the sanctions and indictments against Semenov and Storm, the crypto advocacy group Coin Center released a statement addressing the matter.

The Center’s Director of Research, Peter Van Valkenburgh, noted that the indictment lacked adequate details to demonstrate clear legal violations.

He asserted that Semenov and Storm are accused of “transferring funds on behalf of the public” without registering with the Financial Crimes Enforcement Network (FinCEN). However, no evidence has been presented to indicate that they engaged in activities qualifying as money transmission under the regulations of the Bank Secrecy Act.

According to Van Valkenburgh, the co-founders of Tornado Cash seem to fall under the category of anonymizing software providers, as defined by FinCEN, rather than money transmitters.

The activities they were involved in, such as web hosting and software repository services, are excluded from money transmission according to FinCEN’s 2019 guidance.

Moreover, Coin Center stated that the indictment also claims the defendants promoted the Tornado Cash tool, profited from a governance token, and designed certain aspects of it, but these actions do not correspond with the definition of “acceptance and transmission” of money.

SPECIAL OFFER (Sponsored) Binance Free $100 (Exclusive): Use this link to register and receive $100 free and 10% off fees on Binance Futures first month (terms).
PrimeXBT Special Offer: Use this link to register & enter CRYPTOPOTATO50 code to receive up to $7,000 on your deposits.