Tornado Cash may have been flying under most Americans’ radars for its first few years, but that’s changing rapidly in 2022. The project is now well-known by the public. Unfortunately for users, though, that’s not a testament to its practicality and growing importance. Instead, Tornado Cash has become somewhat infamous. Now, the drama is heating up even more as allegations run deeper, tying the project to Russian espionage.
Tornado Cash’s bad publicity began earlier in August, when the U.S. Treasury Department decided to take action to keep the service out of U.S. crypto. Specifically, the agency levied sanctions against the project to keep Americans from accessing or interacting with it. Additionally, the Treasury blacklisted dozens of wallet addresses associated with Tornado Cash. This has also created issues for other companies; the assets in these wallets are now frozen in limbo and can’t interact with the projects they belong to.
These sanctions are due to accusations about Tornado Cash being associated with illegal activity. The service allows users to mix their assets with others’, making it much more difficult for authorities to track funds tied to illicit transactions. The project has taken lots of heat in recent months as hacker groups have used it to launder money, including the North Korea-backed Lazarus Group.
Atop these sanctions, the international community also appears to be joining the U.S. in punishing Tornado Cash. Following the sanctions, authorities in the Netherlands arrested Tornado Cash developer Alexey Pertsev. Now, the arrest is turning into a major focal point in the story; Pertsev’s past may run deeper than originally thought.
Tornado Cash Developer Fighting Accusations of Ties to Russia
Since his arrest, Pertsev’s story has taken a turn. Late last week, Fortune reported that the Tornado Cash developer isn’t just behind a product fueling illegal activity. The developer is also allegedly linked to a government that stands directly in the face of the United States’ foreign interests.
According to the report, Persev’s employment history shows ties to the Russian government. Specifically, Digital Security OOO employed the developer in 2017. Security experts have linked this company to Russia’s Federal Security Service (FSB). In 2018, it was revealed that Digital Security OOO has supported the FSB’s hacking operations since 2015.
This is a major problem for Pertsev, especially in the wake of Russia’s invasion of Ukraine. The U.S. — as well as much of the Western world — is sanctioning Russia heavily for the war. With the country directly in the spotlight and crypto becoming a major point of interest for regulators, Tornado Cash is quickly finding itself at a dangerous crossroads.
Recently, Pertsev’s wife, Xenia Malik, publicly denied all accusations of her husband’s Russian ties. “We moved to the Netherlands in the hope of a quiet, stable and free life,” she said. Malik added that her and Pertsev explicitly moved due to Russia’s militant nature. Last week, a judge in the Netherlands ruled that Pertsev will remain in jail for the next three months before standing trial.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
