On August 8, 2022, the official website of the Office of Foreign Assets Control of the US Department of the Treasury, referred to as OFAC, showed that it will be part of the Tornado Cash protocol or Ethereum related to it. The addresses that interact with addresses are put into the SDN List (the list of nationals specially formulated by the United States).
Source: U.S. Treasury Department
Here is an explanation of what this SDN List: The U.S. Specially Designated Nationals List is. If added to this list, the property and property rights of individuals or related entities will be frozen under various sanctions programs administered by OFAC.
How to sanction?
Note that in general, U.S. persons (including U.S. citizens, legal permanent residents, entities established under U.S. law, and other organizations located in the U.S., etc.) must not conduct any transactions with SDNs and must freeze SDNs they own or control property and property interests. SDNs are also prohibited from accessing the U.S. financial system. OFAC and the U.S. State Department have both stipulated that aliens implicated in violations of the SDN ban by Americans may be subject to civil and criminal penalties under the International Emergency Economic Powers Act (IEEPA). At the same time, foreigners may also be subject to secondary U.S. sanctions if they conduct material transactions with entities on the SDN List for certain goods and services. Therefore, SDN’s transactions with non-Americans will also be adversely affected to some extent. In addition, being included in the SDN List will also cause the individual or business to suffer some reputational damage.
What is OFAC?
OFAC’s mission is to administer and enforce all economic and trade sanctions based on U.S. national security and foreign policy, including financial sanctions against all terrorism, transnational drug and narcotics trade, and proliferation of weapons of mass destruction. The current OFAC Remains the most important U.S. government agency for economic and trade sanctions targeting specific countries, regions and persons. In recent years, with the deepening of the worldwide anti-corruption and anti-money laundering campaigns, OFAC’s policies and directives have become the operating principles that cannot be ignored by the world’s financial industry, especially the United States and financial institutions closely related to the United States’ financial industry.
What are the possible reasons?
In fact, the U.S. Treasury Department sanctioned another currency mixing service, Blender, in May 2022, on the grounds that it was suspected of helping an official hacker group in a certain country (here mainly refers to the Lazarus Group) to clean up some of the funds stolen from Axie Infinity.
On March 23, 2022, the FBI identified the intrusion into Ronin, the unscrupulous hacker organization was the Lazarus Group, and Tornado Cash was often used in many criminal situations.
As of early May 2022 (at the time of denomination), Lazarus Group had transferred 37,000 ETH to Tornado Cash, or roughly $100 million. Some experts believe that Tornado Cash currently has a balance of 172,000 Ethereum. Around May, the black money from official hackers in a certain country accounted for 20% of the balance held by the Tornado Cash smart contract.
But there is no feasible way to prevent Lazarus Group from adding black money to it. Although Tornado Cash operators have tried many efforts, they cannot limit money laundering, nor can they prevent some criminals from making deposits and withdrawals.
According to legal expert Nicholas Weaver, on April 19, 2022, Lazarus Group received 18,256 ETH (approximately $50 million) in its wallet. On April 28 and 29, the ether was transferred to Tornado Cash, and 12 days after OFAC issued its sanctions, Tornado Cash accepted the hacked ether. So OFAC began to consider sanctioning Tornado Cash, especially proposing that the wallet itself should be listed as a sanctioned entity, arguing that everyone else involved in this pool is helping to hide some hacked money, which may already be OFAC The beginning of planned action against Tornado Cash…
Do you think there are other reasons for OFAC’s current action on Tornado Cash? How will it affect other aspects related to Tornado Cash?
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/interpretation-of-the-toughest-crypto-sanctions-in-history-what-happened-to-tornado-cash/
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