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Volume XII, Number 272

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OFAC Sanctions Cryptocurrency Mixing Service for Allegedly Facilitating Money Laundering

Go-To Guide:

  • OFAC has imposed economic sanctions on cryptocurrency mixing service Tornado Cash, prohibiting U.S. individuals and companies from utilizing its services.

  • Because Tornado Cash allows customers to obscure the origin of a crypto transaction, it allegedly has been exploited by criminals to launder money, including proceeds from ransomware attacks.

  • This is another step in the U.S. government’s efforts to crack down on illicit financial activity in the virtual currency ecosystem.

  • The standard for violating OFAC sanctions is strict liability; accordingly, U.S. firms may wish to consult with counsel on risk mitigation given the government’s focus on potential money laundering using cryptocurrency.

On Aug. 8, 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed economic sanctions on Tornado Cash, a popular cryptocurrency mixing service that allows customers to obscure the original source of virtual currency transactions by “mixing” multiple transactions and then redistributing them. While mixing may have legitimate benefits in some transactions, it also may be exploited by criminals to potentially launder cryptocurrency, including crypto received in connection with ransomware attacks.

OFAC made the sanctions designation pursuant to Executive Order 13694, which was issued in the wake of an increase in ransomware attacks and targets cyber-enabled threats to U.S. national security.[1] According to OFAC, Tornado Cash was responsible for “launder[ing] the proceeds of cybercrimes,” including more than the equivalent of $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that the United States sanctioned in 2019. Among other things, the designation of Tornado Cash has the effect of prohibiting U.S. persons from utilizing the service, as it is added to OFAC’s List of Specially Designated Nationals (SDNs).

The move is but the latest signal of U.S. authorities’ increased attention to the role that mixers play in the anti-money laundering landscape. In October 2020, the Department of Justice struck a cautious note on mixers in its Cryptocurrency Enforcement Framework, warning that operators of mixing services could potentially be criminally liable for money laundering.[2] In 2021, DOJ prosecuted the operator of Darknet-based mixer Helix, who admitted the service was targeted to narcotics sales and other illicit transactions.

The designation of Tornado Cash comes only three months after OFAC’s first-ever designation of a mixing service, blender.io, which also was alleged to have laundered virtual currency for the Lazarus Group. Unlike blender.io, which offered more traditional centralized mixing services, Tornado Cash is a smart-contract-based mixing protocol built on the Ethereum blockchain, and it provides no custodial services. In March 2022, one of its three founders claimed that Tornado Cash’s code allows the service to be run indefinitely without any control or maintenance by its developers.

The Tornado Cash example highlights the uncertainty about mixer developers’ potential liability for the actions of their customers. Federal authorities may have avoided these questions for now by pursuing an enforcement-through-sanctions approach rather than more traditional criminal or civil penalties; the U.S. government typically has wider discretion and a lower burden to impose economic sanctions against non-U.S. persons. It remains to be seen whether the move marks a shift in tactics—perhaps a subtle prioritization of disruption over prosecution—or if instead it simply signals that U.S. authorities intend to use the full range of tools at their disposal to target firms they believe facilitate money laundering.

In a press release announcing its sanctioning of Tornado Cash, OFAC noted that “Treasury will continue to investigate the use of mixers for illicit purposes and use its authorities to respond to illicit financial risks in the virtual currency ecosystem” (emphasis added). Virtual currency businesses may wish to review and update, as appropriate, their Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) and sanctions programs, particularly as they pertain to cryptocurrency businesses that offer anonymizing services. Cryptocurrency firms should be mindful that sanctioned mixers such as Tornado Cash may still be capable of operating, notwithstanding being subject to sanctions. Accordingly, cryptocurrency firms subject to U.S. jurisdiction must take care to ensure that their platforms do not transact with sanctioned entities such as Tornado Cash, as OFAC sanctions violations are subject to a “strict liability” standard, meaning no intent, knowledge, or reason to know that one is dealing with a sanctioned person is required for a violation to occur.


[1] See January 2017 GT Alert.

[2] See October 2020 GT Alert.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 224
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Kara Bombach, Greenberg Traurig, Washington DC, International Trade and White Collar Defense Attorney
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Kara Bombach assists companies to lawfully export goods, technology and services around the globe. She places significant emphasis on helping clients achieve practical, workable solutions to complex regulatory situations arising under anti-corruption and anti-bribery measures (U.S. Foreign Corrupt Practices Act (FCPA) and OECD Convention), export control laws (EAR and ITAR), anti-boycott laws, and special sanctions (embargoes) maintained by the U.S. government (OFAC and other agencies) against various countries (including Iran, Cuba and Sudan), entities and individuals....

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Kyle R. Freeny Shareholder Anti-money laundering issues Bank Secrecy Act Anti-corruption, Foreign Corrupt Practices Act, Asset forfeiture, Foreign Agents Registration Act FARA, Government investigations,Compliance counseling
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Kyle R. Freeny, a skilled trial attorney and former federal prosecutor for the Special Counsel’s Office and the Department of Justice (DOJ), Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), focuses her practice on white collar criminal defense, government and internal investigations, and anti-money laundering (AML) and international corruption matters.

Kyle was one of 19 prosecutors selected by Robert S. Mueller III to conduct the high-profile investigation into alleged Russian election interference, coordination between Russian officials and the Trump...

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David I. Miller White Collar Litigation Attorney Greenberg Traurig New York, NY
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David I. Miller, an experienced trial lawyer and former federal prosecutor, focuses his practice on white collar criminal defense, government and internal investigations, securities and commodities enforcement, related complex civil litigation, and cryptocurrency, cybersecurity, anti-money laundering, and national security matters. Previously, David served for five years as an Assistant U.S. Attorney in the Southern District of New York (S.D.N.Y.), over half that time as a member of the Securities and Commodities Fraud Task Force. He also served as a terrorism prosecutor with the...

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Marina Olman Pal, Greenberg Trauig Law Firm, Miami, Corporate and Finance Law Attorney
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Marina Olman-Pal advises foreign and U.S. financial institutions on licensing, regulatory and compliance matters. She represents clients before U.S. regulators such as the Federal Reserve, OCC, FDIC, FinCEN, OFAC, Florida Office of Financial Regulation and other supervisory authorities. Marina counsels foreign and U.S. financial institutions on a broad range of issues including the Bank Secrecy Act (BSA), anti-money laundering compliance and Office of Foreign Assets Control (OFAC) sanction programs.

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Jena M. Valdetero Cybersecurity Lawyer Greenberg Traurig Law Firm
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Jena M. Valdetero serves as Co-Chair of the firm’s U.S. Data, Privacy and Cybersecurity Practice where she advises clients on complex data privacy and security issues. She has led more than 1,000 data breach investigations. A litigator by background, Jena defends companies against privacy and data breach litigation, with an emphasis on class action lawsuits. She has designed and conducted dozens of data breach tabletop exercises to empower clients to respond effectively to a data security incident. She also counsels companies on data privacy and security compliance programs and advises on...

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