Dutch authorities have announced their arrest last week of a Tornado Cash developer in Amsterdam for his alleged involvement in concealing criminal financial flows and facilitating money laundering through his work on the crypto mixing service.
Tornado Cash, which is built on the Ethereum blockchain, allows users to conceal the sending and receiving addresses of transactions, thus concealing their identity. It has reportedly been widely used by criminals to launder stolen assets, but has also been used for legitimate purposes such as concealing the identities of Ukrainian citizens receiving donated crypto.
Dutch Investigators Say More Arrests May Follow
The Tornado Cash developer’s arrest was announced by the Dutch Fiscal Information and Investigation Service (FIOD) on August 12, two days after it took place. The FIOD said it couldn’t rule out further arrests in connection with the case.
FIOD’s interest in Tornado Cash began in June of this year when its Financial Advanced Cyber Team (FACT) launched a criminal investigation of the service. FACT claims that Tornado Cash has been widely used by hackers to launder vast quantities of stolen crypto assets including “funds stolen through hacks by a group believed to be associated with North Korea”.
FACT found evidence of high-value criminal cash flows through the mixer since it was launched in 2019:
Investigations showed that at least one billion dollars’ worth of cryptocurrencies of criminal origin passed through the mixer. It is suspected that persons behind this organisation have made large-scale profits from these transactions.
Dutch Fiscal Information and Investigation Service (FIOD)
Crypto Community Reacts With Dismay
This arrest comes after the US Treasury’s sanctioning of Tornado Cash last week for what it described as the crypto mixer’s repeated failures to impose effective controls to curtail illegal use of the service. Tornado Cash had previously attempted to weed out criminal users of the service by blocking sanctioned addresses, but the US authorities considered these efforts inadequate.
The crypto community has generally reacted negatively to this arrest, suggesting it represents an infringement of the developer’s right to freedom of speech and an attack on crypto users’ privacy:
Other Twitter users have also pointed out the disparity between the treatment of the Tornado Cash developers and the creators of some high-profile crypto failures and rug pulls: