Torn Token Dives as US Bans a Smart Contract, ENS Domain Goes Offline – Trustnodes

The United States has for the first time banned the usage of a smart contract running on the ethereum network called Tornado Cash.

The zk tech based mixer, which hides asset ownership identity, was used to launder $7 billion the US Treasury said, including “over $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that was sanctioned by the U.S. in 2019.”

This event was sufficiently notable for the Secretary of State Antony Blinken to take a break from tensions in China and the war in Ukraine to state:

“We’ll continue to aggressively pursue actions against currency mixers laundering virtual currency for criminals.

Today, the US Treasury sanctioned virtual currency mixer Tornado Cash, which has been used to launder money for a U.S.-sanctioned DPRK state-sponsored cyber hacking group.”

It’s unclear how they determined this specific group used this specific mixer when its entire point is to hide such a fact.

The sanction in fact would suggest that code wise Tornado Cash is very secure, they can’t peak into it as if they could, then it would have been more useful to make less noise, or of course it’s the opposite if they assumed this is what the public would assume.

“U.S. Treasury sanction of privacy tools places sweeping restrictions on all Americans. Sanctioned Tornado Cash smart contract is a tool, not a person,” said Neeraj K. Agrawal of the bitcoin advocacy group Coin Center.

That sentiment was shared by numerous cryptonians with Jake Chervinsky, Head of Policy at the Blockchain Association, stating:

“For years, the US Treasury has carefully distinguished bad actors from the neutral tools & technology that they (plus everyone else in the world) are able to use.

The decision to sanction Tornado Cash, a decentralized protocol, threatens that smart & balanced approach to crypto.”

The dollar pegged stablecoin USDc took action to freeze some usdc associated with Tornado Cash, sending ripples through some parts of the crypto space that realized the ability of state enforcement now very much extends to the $54 billion dollar token.

They had no choice as non compliance with sanctions is a criminal offence which can mean prison. The US Treasury says:

“As a result of today’s action, all property and interests in property of the entity above, Tornado Cash, that is in the United States or in the possession or control of U.S. persons is blocked and must be reported to OFAC.”

There are currently 18,280 eth in Tornado Cash, worth $32 million. It handled 13,856 transactions since it launched on the 16th of December 2019, with the contract generally having about 10,000 eth at any one time.

There’s collateral damage here in as far as Tornado Cash has airdropped Torn, a token that is minted by sending a transaction to the smart contract.

At least some of the smart contract users therefore are innocent, ordinary ethereans who never cared to mix, instead were and maybe are just speculating on Torn.

That has dived of course, down 28%, with it currently having a market cap of $24 million on volumes that have increased by 770% to $88.5 million.

This is listed on numerous prominent exchanges, including Binance, and it is of course on Uniswap too.

The token has launched some time ago however, in February 2021, but the archived page of Tornado suggests the minting was a continuous process that continued to today.

As such, the sanction probably has caught up an unknown number of innocent ‘bystanders,’ making it a very blunt tool.

ENS and IPFS Taken Down?

Roman Semenov, a Moscow based developer who coded Tornado, had his GitHub suspended. That’s presumably to remove the Tornado code, although it is on archive and it is of course on the ethereum network.

However, Tornado is a bit more complicated than a simple contract due to the zk tech aspects which involve ‘circuits,’ and so it isn’t clear whether a simple copy paste of the eth contract would work. Its removal from GitHub therefore may send it a bit more underground.

Interestingly, the IPFS hosted user interface linked from the main archived Tornado site, is offline.

IPFS is mean to be decentralized, and the domain in this case has a .eth.limo extension. The project says:

“LIMO functions as a drop-in replacement for eth.link; a Web 2.0 infrastructure stack for resolving Ethereum Name Service (ENS) records and associated IPFS content (Web 3.0). LIMO allows users and dApp developers to effortlessly access and host static sites built with a combination of IPFS and ENS.”

Well, this clearly does not seem to be that decentralized, with Semenov briefly bragging that the UI sites were not taken down, but they now appear to be. So showing just how much expertise the US government has now gained.

Semanov himself says he has not been sanction, “only tornado cash smart contracts and website are,” bypassing any potential code is speech challenges.