Tornado Cash, the “crypto-mixing” protocol, has experienced a resurgence in 2024 after a significant decline in activity following the U.S. government’s sanctions two years ago.
The sanctions, imposed by the Office of Foreign Assets Control (OFAC) in August 2022, initially led to a drop in monthly deposits to Tornado Cash, with activity plunging by more than 90%.
Tornado Cash Sees $1.9 Billion Deposits in H1 2024
However, recent data from blockchain analytics firm Flipside Crypto shows that the protocol received more than $1.9 billion in deposits in just the first half of 2024, a 50% increase from the total deposits throughout 2023.
Recently, the service has seen heavy inflows from hackers involved in major exploits. According to Arkham Intelligence, the Poloniex exchange hacker, who stole over $100 million last year, transferred $76 million to Tornado Cash in the past two months.
Similarly, the HECO Bridge and Orbit Chain exploiters moved $166 million and $47.7 million to the mixer this year. This is because Tornado Cash’s decentralized nature has made it challenging for U.S. authorities to regulate its use effectively.
Designed to uphold privacy, a core principle of the decentralized crypto space, the protocol mixes funds from various transactions before redistributing them, thereby obscuring their original sources. This emphasis on privacy has, in turn, made Tornado Cash an attractive option for individuals seeking to launder illicit funds.
Resurgence of Mixing Services
In a recent report, Blockchain analytics firm Chainalysis also noted a general increase in market activity and a resurgence of mixing services in 2024.
“When looking at the growth of individual mixing services overall, we see that WasabiWallet, JoinMarket, and Tornado Cash have grown the most,” said the report.
In August 2022, the OFAC sanctioned Tornado Cash after uncovering that the North Korean hacking group Lazarus had used the protocol to launder approximately $455 million in illegal funds.
The OFAC sanctions require that anyone engaging with Tornado Cash would be placed on a “blacklist,” preventing their wallet from being accepted at any legally compliant crypto exchanges.
The sanctions have also led to significant legal and regulatory challenges for Tornado Cash’s co-founders, Alexey Pertsev, Roman Storm, and Roman Semenov. In 2023, Alexey Pertsev was sentenced to five years and four months in a Dutch prison after being convicted on money laundering charges.
Roman Storm was arrested on similar charges in the United States in August and pleaded not guilty. He was released on a $2 million bond 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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