After spending almost nine months in jail on charges of money laundering, Alex Pertsev, the creator of Tornado Cash, is expected to be released under parole. This news comes as a relief to Pertsev’s supporters, who have been advocating for his release since his arrest in July 2022. However, the case has raised concerns about the use of cryptocurrency and the role of developers in enabling money laundering activities. In this article, we’ll take a closer look at the Tornado Cash case and Pertsev’s release.
What Was Tornado Cash
Tornado Cash was a cryptocurrency tumbler that operated as an open-source, non-custodial system. It ran on the popular Ethereum Virtual Machine-compatible (EVM) network and helped users keep their open-ledger tokens private.
The mixing service merged funds from multiple inputs for an extended and random duration, then distributed them back to new destination addresses. As all the funds were lumped together and then distributed at random times, making it very difficult to trace the exact owners of the original tokens. However, as we’ve seen in the past few years, it doesn’t make your tokens untraceable. Multiple Darknet Market users have been captured through tracing Bitcoin.
By August 18, 2022, Tornado Cash had processed over $7.6 billion in ETH. It was also available on other networks, such as Binance Smart Chain, Polygon, and Optimism. This made it one of the most unique mixing services, as most only offer BTC mixing.
The Tornado Cash protocol was the most used currency mixer on the Ethereum blockchain until Alex Pertsev’s arrest last year. Since Pertsev’s arrest, and under new sanctions that were challenged in court. US residents are no longer legally allowed to use Tornado Cash.
Tornado Cash Missdeads Leading To Pertsev’s Arrest
According to the Office of Foreign Assets Control (OFAC) there’s evidence to say that the Lazarus Hacking Group based in North Korea utilized Tornado Cash. They embezzled the crypto into the country by scamming users around the world. In addition, Ethereum co-founder Vitalik Buterin also admitted to sending anonymous funds through Tornado Cash as a method to help with the war in Ukraine.
Tornado Cash has primarily been used to engage in illicit activities. As a result, regulators are trying to take on the entire system. They are causing significant changes to the system, such as an entire ban from the use in the US. Americans who used the Tornado Cash protocol lost access to their funds and other crypto applications. This caused quite the backlash as you might expect.
Roman Semenov (another developer from Tornado Cash) wasn’t sanctioned back on August 8th for his involvement in the platform. Although he was not penalized, for his participation in the platform, he posted on Twitter that his Github account had been suspended.
Sanctions are usually aimed at international criminals and terrorist organizations like Al-Qaeda. Now they are preventing Americans from using software tools. Previous shutdowns targeted those controlling a centralized mixer. But, in 2020, Roman Semenov and Storm destroyed their keys, and this is how Tornado Cash operated. If nobody is in charge, there is nobody to hold accountable.
“Today’s action does not seem so much as a sanction against a person or entity with agency. It appears instead to be the sanctioning of a tool that is neutral in character and that can be put to good or bad uses like any other technology [Specifically Crypto].”
As CEO of CoinCenter put it
This summer, Tornado Cash sent funds to celebrities in the act of rebellion. The law states that celebrities’ funds are dirty, but they can’t do anything about it. But, under protocols, you cannot start a petition, which is the typical path to have sanctions lifted. As a result, even cryptography professors were uncertain whether they could share codes with students.
Who Is Alexey Pertsev, And What Did He Do?
Before his rise as the Tornado Cash figure he is, Alexey Pertsev attended the Maritime State University in Vladivostok, Russia. He earned a specialist degree in Computer and Information Systems Security. In 2017, he joined the FSB (Modern Russian KGB) as digital security and penetration testing.
After his time as a cybersecurity professional, Pertsev co-founded the cybersecurity firm PepperSec. It was then that he became an open-source code contributor to Tornado Cash. This is also what brought him into the limelight and led to his arrest.
In August 2022, Pertsev was arrested for his contributions to Tornado Cash. His arrest was for assisting the North Korean hacking groups in processing over $1 billion in stolen funds by using their mixer system. In addition, Pertsev has claimed to have helped in excess of 40,000 users obscure more than 150,000 cryptographic transactions.
At a November hearing, the Dutch government alleged it was a clear case of money laundering. The public prosecutor said Tornado Cash was being run like a business and not using decentralized automation, a practice that reduces commissioning and time-to-market. Pertsev’s lawyers, meanwhile, say the courts don’t understand crypto. They are confusing Tornado Cash with a centralized Bitcoin mixer. While Tornado Cash is a decentralized, noncustodial privacy platform.
Interpretation of this whole dellamah will improve as judges run through how Tornado’s decentralized governance works. In the meantime, there has been a great personal cost to Alexey Pertsev.
The court rejected Pertsev’s requests for bail to spend Christmas at home. The basis for the rejection was that he could interfere with the investigation or try to flee. But he says he has little interest in returning to Russia, where he could face the draft.
Questions asked as to whether he would commit another crime if released surprised him. He does not even know what crime he committed in the first place, and the court has not ruled him guilty. In this case, the US is taking a “Guilty until proven innocent” approach it seems.
Developers Express Concerns About Code
Many developers expressed their concern at a demonstration against the arrest. They are concerned about prosecution for the actions of malicious individuals using their code, which ultimately has nothing to do with them. “Privacy is normal; it’s not a crime,” protest organizer Eleonore Blanc said. “Being free of centralized institutions is the whole point of crypto.”
Regulators have attempted to “fix” the crypto market before without the necessary skills or knowledge. But it’s in everyone’s best interest to find a way to make blockchain compatible with privacy laws.
Alexey Pertsev Can Await Trial From Home
A Dutch court issued a ruling that Alexey Pertsev can now await trial from home after spending nine months in detention. The Dutch financial crime authority (FIOD) ordered Pertsev’s arrest in August. This later decision, made after much deliberation, led to the recent decision of a court in the city of S-Hertogenbosch to release him on bail but keep him under house arrest.
“Alex Pertsev, Tornado Cash Dev, bail denied again. His next hearing is in April.
*Alex Pertsev is being held without charge, has a family, and simply wrote code.
*meanwhile SBF is at home using VPN’s and playing video games.
AB-Abacus on Twitter
According to Pertsev’s lawyer, Keith Cheng, they were ecstatic to hear about his bail approval. Pertsev will now work hard on his defense, which will raise issues about privacy on Ethereum. Pertsev’s release will give the court enough time to install monitoring devices at his home. He will also have to wear an ankle bracelet, but he does not need to provide any financial security for his release.
The U.S. Office of Foreign Assets Control sanctioned Tornado Cash. A Dutch public prosecutor said he posed a flight risk and could hide evidence if released. Yet, until this week, they had only made generic accusations without basis.
The public prosecutor later levelled more specific charges against Pertsev, accusing him of laundering over 500,000 ETH that he should have suspected was of criminal origin. Pertsev has denied the charges.
The court will hold a further investigation hearing on May 24. At this hearing, they will also explore the issue of Pertsev’s house arrest status, which may expire in July.
Hey there, I’m a dark web geek who’s been around for the last 8 years. More precisely, I’m livedarknet’s senior content writer who’s been writing about darknet marketplaces, tutorials, and cybersecurity stuff for educational purposes.