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The PepperSec team built Tornado Cash, an Ethereum mixer in 2019. - 2
In 2022, the U.S. Treasury Office sanctioned Tornado Cash for being a money laundering tool. Two days after this, Alexey Pertsev was arrested for his contribution to the platform’s codebase.
Who is Alexey Pertsev?
Alexey Pertsev’s career as a developer started in 2017 while working on smart contracts and penetration testing at Digital Security. He performed authorized attacks on websites and computer systems of companies, tracking possible cyber weaknesses in their system. The U.S. treasury department sanctioned Digital Security in 2018, stating that it provided technological support to the security service of Russia.
Alexey Pertsev joined Roman Storm and Semenov Roman to build PepperSec in 2018. They performed security checks on blockchains, websites, and mobile applications.
In 2019, the team launched Tornado Cash, an Ethereum mixer that provides privacy to users transacting on the blockchain. Even though the crypto network is decentralized, all transactions are recorded on the blockchain which acts as a public ledger.
The transaction history of users can be traced from their addresses. Tornado Cash helped users to conceal their transaction history by breaking the link between the sender and receiver addresses.
Like liquidity pools, Tornado Cash allows users to deposit a fixed amount of ETH or ERC-20 tokens to a pool. These tokens are then mixed with other tokens in the pool and redistributed. If the mixed token is sent to another party, the sender’s address will be that of Tornado Cash and not the original user.
However, in 2020, the developers of Tornado Cash burnt their admin keys allowing the protocol to be non-custodial, and eliminating the chances of crypto scams through a rug pull. They believed they were no longer responsible for the platform as the protocol was operating as a self-executing code.
Alexey Pertsev and Tornado Cash Controversy
In June 2022, the Dutch Fiscal Investigation Service began an investigation into Tornado Cash, stating that the company was not properly checking to see if funds were of criminal origin. It alleged that $1 Billion from the $7 Billion worth of total Tornado Cash transactions were of criminal origin. This includes the $455 Million laundered by the Lazarus hacking group.
On August 8, 2022, the U.S. Treasury’s Office of Foreign Assets Control sanctioned Tornado Cash for being a money-laundering tool. The reason was Tornado Cash’s ability to grant transactions anonymity as a coin mixer. Coin mixers have regularly been suspected of being a perfect solution for laundering funds.
There was debate over the possibility of sanctioning a piece of code and hence, they went after the developers and US-based users, who could qualify as a sanctioned entity. This prohibited U.S. citizens and businesses from using Tornado Cash services.
On August 10, 2022, Dutch authorities arrested Alexey Pertsev as a prime suspect, owing to his contributions to Tornado Cash’s codebase. He was accused of exerting control over its voting rights which facilitated money laundering.
However, he maintained that he was just an open-source contributor to the protocol. He was released in April 2023 after spending 9 months in jail without any trial.
Source: https://www.thecoinrepublic.com/2023/08/13/alexey-pertsev-life-work-and-contribution-to-crypto/