A U.S. appeals court has ruled that the Treasury Department overstepped its authority when it imposed sanctions on the cryptocurrency mixer Tornado Cash in 2022. The department accused Tornado Cash of facilitating over $7 billion in the laundering of funds, a portion of which was reportedly linked to North Korean hackers. However, the court stated that the sanctions were not lawfully justified under federal law.
Tornado Cash is a cryptocurrency mixer—a type of software that anonymizes digital transactions. It helps users conceal the origin and ownership of their cryptocurrencies by pooling and shuffling deposits. The Treasury's Office of Foreign Assets Control (OFAC) has blacklisted Tornado Cash under the International Emergency Economic Powers Act (IEEPA), as it was alleged that it had been used for laundering cybercrime proceeds, among which is $455 million reportedly stolen by the Lazarus Group, a North Korean hacking group.
Court's Ruling and Key Arguments
This came about with a decision by a panel of three judges from the New Orleans 5th U.S. Circuit Court of Appeals. A spokesperson from the panel, Judge Don Willett, wrote, "The smart contracts forming Tornado Cash did not constitute 'property.'" Law puts the authorization of regulating the property to OFAC but held that because these were immutables and unchangeables, the codes could neither be owned nor controlled hence would exempt from sanctions.
The court acknowledged that the risks that technologies like Tornado Cash pose are legitimate, but it held that updating the law to address such issues is the job of Congress, not the judiciary.
The lawsuit challenging the sanctions was brought by six Tornado Cash users with the financial support of Coinbase, a major cryptocurrency exchange. The court's decision was called a "historic win for crypto and liberty" by Paul Grewal, Coinbase's chief legal officer. Coinbase had argued that sanctioning an entire technology could stifle innovation and harm privacy rights.
Legal Troubles for Tornado Cash Developers
Despite the court ruling, there are still legal problems for those associated with Tornado Cash. In May, developer Alexey Pertsev was sentenced to over five years in prison in the Netherlands for money laundering. Founders of Tornado Cash, Roman Semenov and Roman Storm, are also charged with money laundering and sanctions violations in the United States.
The Bigger Picture
This case, therefore, underlines the legal and ethical challenges of privacy-focused technologies such as cryptocurrency mixers. It also calls for updated regulations to balance innovation, privacy, and security in the digital age.
The North Korean hacker group Lazarus has once again made headlines, this time for exploiting LinkedIn in their cyber operations. According to a report by blockchain security analytics firm SlowMist, Lazarus hackers are leveraging the professional networking platform to target unsuspecting users and pilfer their assets through malware attacks.
LinkedIn Used as a Trojan Horse
This involves Lazarus members masquerading as blockchain developers seeking employment opportunities in the cryptocurrency industry. By posing as job seekers, they lure in vulnerable targets, enticing them to share access to their code repositories under the guise of collaborative work. However, the innocuous-seeming code snippets provided by the hackers contain malicious elements designed to syphon off confidential information and assets from the victims' systems.
History of Innovation in Cybercrime
This tactic isn't new for Lazarus, as they previously employed a similar strategy in December 2023, posing as recruiters from Meta. Back then, they convinced victims to download malware-infected coding challenges, which, when executed, granted remote access to their computers.
Lazarus: A Cyber Threat
Lazarus has earned a notorious reputation in the cybersecurity realm since its emergence in 2009. The group is infamous for orchestrating some of the largest cryptocurrency heists, including the 2022 Ronin Bridge hack, which saw a staggering $625 million being stolen.
Laundering Techniques
Once they've plundered their ill-gotten gains, Lazarus employs sophisticated techniques, such as crypto mixing services, to launder the funds back to North Korea. Reports suggest these funds are funnelled into financing the country's military endeavors.
Industry Response and Countermeasures
In response to persistent cyber threats, crypto companies are advocating for heightened security measures and conducting awareness seminars to educate employees about potential risks. The industry's proactive stance has led to the implementation of robust security protocols and increased investment in cybersecurity to safeguard against data breaches and financial theft.
The recent exploits by Lazarus serve as a stark reminder of the ever-present dangers lurking in the digital realm. As cyber threats continue to expand, it's imperative for individuals and organisations alike to remain careful and adopt proactive measures to mitigate risks and be digitally secured.
By staying informed and proactive, investors, traders, and social media users can collectively work towards thwarting cyber threats and safeguarding digital assets in an increasingly interconnected world.