Two co-founders of cryptocurrency giant Tornado Cash, one of them a Russian national and the other an executive in Washington state, have been charged with operating a crypto scheme that allegedly laundered hundreds of millions of dollars for North Korean hackers, according to a federal indictment unsealed Wednesday in the Southern District Court of New York.
Roman Semenov, the Russian national, and Roman Storm, were charged with laundering and violating sanctions through Tornado Cash, a crypto "mixer" that allegedly laundered more than $1 billion, including hundreds of millions that went to Lazarus Group, a North Korean cybercrime organization, the indictment alleged.
A cryptocurrency mixer, or tumbler, is a service that helps protect the privacy of users by mixing up a transaction's origins before being transmitted to a recipient.
"While publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov in fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes," US Attorney Damian Williams said in a statement.
Semenov is still at large, and Storm had been arrested in Washington, according to the statement from the US Attorney's Office.
The Treasury also personally sanctioned Semenov Wednesday in coordination with the DOJ. The third co-founder of Tornado Cash, who was unnamed in the indictment, was arrested on money laundering charges in the Netherlands last year, the Treasury said.
"We are incredibly disappointed that the prosecutors chose to charge Mr. Storm because he helped develop software, and they did so based on a novel legal theory with dangerous implications for all software developers," said Storm's lawyer, Brian Klein, in a statement.
"Mr. Storm has been cooperating with the prosecutors' investigation since last year and disputes that he engaged in any criminal conduct," Klein said.
Tornado Cash is one of the most well-known mixers, and it, along with much of the crypto industry, was under growing regulatory scrutiny. The US Treasury said crypto mixers are commonly used to launder stolen funds.
The Tornado Cash founders made millions advertising its services to provide untraceable financial transactions, the DA said, but they "chose not to implement know your customer or anti-money laundering programs as required by law" despite customer complaints.
Lazarus Group, the North Korean organization, allegedly used Tornado Cash in April and May 2022, the US attorney's office said, in violation of US sanctions. Storm and Semenov continued to facilitate the sanctions-violating transactions, the indictment alleged.
Both are charged with one count of conspiracy to commit money laundering and one count of conspiracy to violate the International Economic Emergency Powers Act. Each count carries a maximum sentence of 20 years in prison. A charge of conspiracy to operate an unlicensed money transmitting business has a maximum sentence of five years.
The US Department of the Treasury sanctioned Tornado Cash last year, alleging it laundered more than $7 billion worth of crypto since 2019. The sanction prohibits Americans or those under US jurisdiction from using the mixer.
