The Office of Foreign Assets Control of the US Department of the Treasury (OFAC) imposed sanctions on the virtual currency mixer Tornado Cash. The service is accused of helping launder more than $7 billion in cryptocurrencies since 2019.

According to the US Treasury Department, Tornado Cash helped launder more than $455 million stolen by the North Korean hacker group Lazarus, included in the US sanctions list in 2019. In addition, Tornado Cash was used to launder more than $96 million in funds robbed from Harmony Bridge on June 24, 2022, and at least $7.8 million stolen from Nomad protocol on August 2, 2022.

“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson.

Following the OFAC announcement, USDC stablecoin issuer Circle  froze over 75,000 USDC worth of funds linked to the 44 Tornado Cash addresses, Dune Analytics found out.

The next day key blockchain infrastructure services Infura and Alchemy, popular API and node infrastructure providers, started preventing users via blocking remote procedure call (RPC) requests from accessing Tornado Cash. Then, dYdX exchange confirmed it started blocking wallets tied to Tornado Cash.

In April, Tornado Cash announced it started using Chainalysis oracle to reveal crypto addresses that fell under OFAC sanctions. However, OFAC found these attempts insufficient.

The decision of OFAC was heavily criticized in the crypto community. Erik Vorhees, co-founder of ShapeShift, called it a violation of the fundamentals of the US Fourth Amendment which grants the people's right to have private life, free of unreasonable searches and seizures.

Ethereum co-founder Vitalik Buterin confessed that he also used to transfer virtual currencies via Tornado Cash in order to keep these transactions confidential. Buterin used Tornado Cash for donations to Ukraine. "My intent was protecting the recipients, not myself. The RU government knows my positions on the Ukraine issue anyway."

The TC's ban was viewed by the crypto community as a part of a broader attack on the cryptocurrency world fundamentals, such as privacy and freedom.

Founder of Uniswap Hayden Adams tweeted that "sanctioning an immutable smart contract, as opposed to individuals/orgs feels like a big freedom of speech issue and bad precedent."