Tornado Cash Makes $1.9 Billion Comeback Despite Sanctions

Tornado Cash, the crypto mixer that had hit by sanctions and legal problemsmade a surprising comeback in 2024. Despite all the drama, this platform achieved one major feat: its deposit volume skyrocketed.

Tornado Cash, a decentralized privacy solution for Ethereum, has defied expectations. According to Flipside Crypto datait collected a whopping $1.9 billion in deposits in the first half of 2024. That’s an impressive 50% more than it collected in all of 2023. And it achieved this feat despite wearing the official “sanctioned” badge of the Office of Foreign Assets Control (OFAC) since August 2022.

Tornado Cash deposits chart shows an increase after more than a year of low activity. Source: Flipside Crypto

Punishments

OFAC sanctions put Tornado Cash users in a precarious position. Anyone interacting with the protocol risked being blacklisted, effectively preventing their wallet from being accepted on compliant cryptocurrency exchanges. Withdrawing cryptocurrencies to fiat currencies from OFAC-compliant exchanges became very difficult for those associated with Tornado Cash.

But here’s where it gets interesting. Despite the sanctions, Tornado Cash remains a favorite destination for large hacker groups looking to hide the flow of ill-gotten funds. For example, Hacker Who Stole $100 Million of the Poloniex exchange transferred $76 million to Tornado Cash in May. The groups involved in the HECO Bridge and Orbit Chain hacks transferred $166 million and $48 million, respectively, through the platform in the first half of 2024. Even the confirmed wallet address linked to the $235 million hack on Indian cryptocurrency exchange WazirX On July 18, received funding via a Tornado Cash deposit.

Regardless, Ether continues to dominate as the most popular crypto asset used on the mixing protocol, as maintained by a chart from Flipside Crypto.

Source: Flipside Crypto

Legal drama and rights advocacy give a lot of room to speak out

Several figures from the cryptocurrency sector have contested Tornado Cash penalties via a lawsuit that began in 2022. The plaintiffs argue that penalizing an anonymous mixing service is “illegal and unconstitutional.” They claim that Tornado Cash cannot be considered a country or a “group,” and that blocking it violates the right to free speech under the U.S. Constitution. The lawsuit has received support from major cryptocurrency companies like Coinbase and groups like The Blockchain Association and Coin Center, who also claim the penalties are unlawful.

Tornado Cash founders Roman Storm, Alexey Pertsev and Roman Semenov are accused of money laundering and violation of penalty rules. Pertsev is serving a prison sentence of more than five months In a Dutch prison, Storm was arrested in 2022 and later released on $2 million bail. Semenov has since been on the run.

However, the US Treasury says cryptocurrency mixers pose a threat to national security and is concerned that Tornado Cash is not doing enough to stop money laundering.

But no matter how hard they try, the fact that the tool is decentralized means it is difficult for US authorities to effectively control its use.

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