Tornado Cash, the crypto mixer that got slapped with sanctions and legal troubles, is making a surprising comeback in 2024. Despite all the drama, this platform has managed to pull off a major feat – its deposit volume has shot up.
Tornado Cash, a decentralized privacy solution for Ethereum, has defied expectations. According to data from Flipside Crypto, it raked in a huge sum of $1.9 billion in deposits during the first half of 2024. That’s an impressive 50% more than what it collected throughout 2023. And it achieved this feat despite wearing the official “sanctioned” badge from the Office of Foreign Assets Control (OFAC) since August 2022.
Tornado Cash deposits chart showing surge after more than a year of low activity. Source: Flipside Crypto
The Sanctions
The OFAC sanctions placed Tornado Cash users in a precarious position. Anyone interacting with the protocol risked being blacklisted, effectively preventing their wallets from being accepted on legally compliant crypto exchanges. Withdrawals of crypto into fiat from OFAC-compliant exchanges became highly challenging for those associated with Tornado Cash.
Now, here’s where it gets interesting. Despite the sanctions, Tornado Cash remains a favored destination for large hacking groups seeking to obscure the flow of ill-gotten funds. For example, the hacker who stole $100 million from the Poloniex exchange moved $76 million to Tornado Cash in May. Groups involved in the HECO Bridge and Orbit Chain hacks moved $166 million and $48 million, respectively, through the platform in the first half of 2024. Even the confirmed wallet address linked to the $235 million hack of Indian crypto exchange WazirX on July 18 received funding via a Tornado Cash deposit.
Be that as it may, Ether continues to dominate as the most popular crypto asset used on the mixing protocol, a chart from Flipside Crypto maintains.
Source: Flipside Crypto
Legal Drama and Advocacy is Big on Speaking Up
Several figures within the crypto industry have challenged the Tornado Cash penalties through a lawsuit that started in 2022. The plaintiff argues that penalizing an anonymous mixing service is “illegal and against the constitution.” They say that Tornado Cash can’t be seen as a country or a “group,” and blocking it goes against the right to free speech under the US Constitution. This lawsuit has gotten support from big crypto companies like Coinbase and groups like The Blockchain Association and Coin Center, who also say the penalties are illegal.
The founders of Tornado Cash, Roman Storm, Alexey Pertsev, and Roman Semenov, are accused of money laundering and breaking penalty rules. While Pertsev is serving a five-month plus jail term in a Dutch prison, Storm was arrested in 2022 and released on a $2 million bail afterward. Semenov has since been on the run.
However, the US Treasury says that crypto mixers are a threat to national security, and they’re worried that Tornado Cash isn’t doing enough to stop money laundering.
But no matter how hard they try, the fact that the tool is decentralized means it’s hard for US authorities to effectively control its use.
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