Arrests of Tornado Cash developers fueled an outbreak of criticism among blockchain and cryptocurrency opinion leaders. However, some investors claim it was a necessary victim for institutional adoption.

On August 12, Dutch Fiscal Information and Investigation Service (FIOD) said in a statement that they arrested a 29-year-old individual in Amsterdam suspected of involvement in concealing criminal financial flows and facilitating money laundering" via Tornado Cash. The Block revealed that the individual was Alexey Pertsev, Tornado Cash co-founder and engineer, citing his wife confirmation. Furthermore, CoinTelegraph reported citing its own sources that two other founders of Tornado Cash, Roman Panchenko and Nikita Dementyev, were arrested, as well, in Seattle and Tallinn, respectively.

The arrests came after the United States Treasury Department had put multiple Tornado Cash addresses on the sanctions list of the Office of Foreign Asset Control (OFAC) on August 8 due to billions of dollars, including funds stolen by North Korean hacking groups, found laundered via the service.

This step caused a wave of outrage among crpto communit leaders. Co-founder and CEO at Coinbase Brian Armstrong called it "a bad precedent" that could have "unintended consequences".

Chris Burniske, a cofounder of Placeholder, a New York-based venture firm that specializes in cryptoassets, ironically noted that Tornado Cash is a tool, and it can't be considered bad or good on its own.

As an act of protest, an anonymous user sent small amounts of Ethereum to well-known individuals in the cryptocurrency community from the OFAC-blocked Tornado Cash service. The list of recipients included many US residents, such as artist Beeple, Coinbase CEO Brian Armstrong, Randy Zuckerberg, and others. Following these transactions, Aave DeFi protocol blocked TRON founder Justin Sun's wallet and a number of other users from accessing the platform as they all received 0.1 ETH from an anonymous user.

Later, the Aave team clarified that they use TRM's tools to automatically identify and block black-listed addresses. Being aware of the "dust attack", Aave developers fixed the problem.

"We have been made aware that the API may have made incorrect calls about which wallet should be included in block-lists, in this case including those wallets that were sent “dusted” ETH by third parties interacting with the Tornado Cash contracts without consent."

The ban also provoked discussions on whether it is possible to achieve transaction privacy and possible solutions of this problem. Jackson Palmer, Dogecoin creator, suggested that the transaction privacy should not be reached by mixing one's funds up with other's coins.