Banned Crypto Mixer Tornado Cash Witnesses Surprising Uptick in Deposit Volume in First Half of 2024

Banned crypto mixer Tornado Cash has witnessed a surprising uptick in deposit volume in the first half of 2024 despite ongoing sanctions and continued legal strife for its founding team.

Despite being sanctioned by the U.S. government and facing ongoing legal challenges, crypto mixer Tornado Cash has surprisingly seen a significant increase in deposits during the first half of 2024.

According to data from Flipside Crypto, a total of $1.9 billion has been deposited into Tornado Cash so far this year, marking a 50% increase compared to the total sum of deposits throughout 2023.

The Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in August 2022 after it was revealed that North Korean hacking collective Lazarus Group had used the protocol to launder approximately $455 million in illicit funds.

The OFAC sanctions stipulate that anyone who interacts with the protocol would be included on a “blacklist,” effectively banning their wallet from being accepted at any legally compliant crypto exchanges.

In essence, any wallet that has interacted with the crypto mixing protocol would face extreme difficulty in attempting to withdraw that crypto into fiat from a centralized exchange.

However, despite these sanctions, the mixing service has remained a popular destination for large hacking groups looking to obscure the flow of ill-gotten funds.

According to data from blockchain analytics firm Arkham Intelligence, the hacker behind the $100 million Poloniex exchange exploit has transferred $76 million to the mixer since May.

Additionally, the nefarious entities behind the HECO Bridge and Orbit Chain exploits shifted $166 million and $48 million respectively to the mixer throughout the first half of the year.

More recently, one of the confirmed wallet addresses used in the $235 million hack of Indian crypto exchange WazirX on July 18 was funded by a Tornado Cash deposit.

Several figures from the crypto industry have been challenging the Tornado Cash sanctions through an ongoing lawsuit, which was initially filed in 2022.

The plaintiffs argued that sanctioning Tornado Cash is “unlawful and unconstitutional” as the anonymous mixing service cannot be viewed as a country or an “entity” and that blocking it violates the right to free speech under the U.S. Constitution.

Related: Tornado Cash developer Alexey Pertsev denied bail while preparing appeal

The lawsuit has since been backed by several large crypto firms including Coinbase, and crypto advocacy groups The Blockchain Association and Coin Center, who also claim the sanctions are unlawful.

But the U.S. Treasury says crypto mixers are a national security threat and Tornado Cash repeatedly failed to create controls to stop money laundering.

Meanwhile, the three co-founders of Tornado Cash, Alexey Pertsev, Roman Storm, and Roman Semenov, have faced challenges following the legal and regulatory crackdown on their mixing protocol.

Alexey Pertev was sentenced to five years and four months in Dutch prison after being convicted on money laundering charges in 2023.

Roman Storm was arrested in the United States in August on money laundering charges and subsequently pleaded not guilty to all charges.

He was released on a $2 million bond shortly after his arrest and has since filed a motion to dismiss all charges on March 31.

The third co-founder, Roman Semenov, remains at large.

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