Tornado Cash was launched in 2019 as a tool to increase the anonymity of Ethereum users by blending their assets. On Aug. 8, the Office of Foreign Assets Control (OFAC) placed Tornado Cash and 44 related Ethereum and USDC wallets on its list of prohibited entities. The list included the smart contracts that power Tornado Cash, as well as a wallet for collecting donations for the project. Interacting with these wallets by Americans will now be considered a violation of the law, even if they simply want to increase their anonymity.

"Due to the nature of blockchain transactions, an American who is sent money through Tornado Cash will not even be able to reject it and thus technically violate OFAC rules," notes Coin Center.

The U.S. Treasury cited the North Korean hacker group Lazarus' use of the mixer, as well as the laundering of more than $103.8 million from the hacks of crypto projects Horizon Harmony and Nomad this summer, as justification for its actions.

"Investigations revealed that at least a billion dollars worth of criminally derived cryptocurrency was put through the mixer. The people behind this organization are believed to have profited heavily from these transactions," the agency said in a statement.

Two days after OFAC's announcement, a developer was arrested in Amsterdam and accused of being involved in concealing criminal cash flows and money laundering through participation in Tornado Cash. As The Block learned, the detainee is 29-year-old Alexey Pertsev - his wife confirmed it. However, the Dutch Financial Information and Investigation Service has not ruled out further arrests.

Pertsev's arrest sparked condemnation in the cryptocurrency community.

"They put a man in jail just because bad people were using his open source code. This is unacceptable in any free society," wrote Cinneamhain Ventures partner Edam Cochran.

Members of the decentralized Tornado Cash organization (Tornado Cash DAO), meanwhile, voted unanimously to include it as a keyholder for the multi-signature wallet containing the project's assets. Tornado Cash's holdings are predominantly in TORN tokens and currently stand at $15 million. Providing the organization with a key would allow it to participate in unlocking assets in the event that one or more other participants are detained by law enforcement.

Simultaneously with the launch of the three-day vote, the necessary changes were prepared at the blockchain level. Usually there is a delay between the two events, allowing sufficient time for discussion. In this case, it was decided not to do so due to the urgency of the issue, and, as it turned out, for good reason. After the OFAC announcement the forum, Discord and GitHub of the project were shut down, which will make further communication and voting between the participants more difficult. In addition, centralized node hosting services Infura and Alchemy began blocking access to the Tornado Cash site, and Circle froze the USDC tokens it issued at addresses on the sanctions list.