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Tornado Cash says it uses Chainalysis oracles to block access from OFAC-sanctioned addresses

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Tornado Cash on Friday announced that it uses Oracle contracts from Chainalysis to block wallet addresses sanctioned by the US Office of Foreign Assets Control (OFAC). The move comes after the US Treasury Department linked North Korean cybercriminals Lazarus Group as the alleged culprit for the recent $600 million+ Ronin Bridge exploit. According to blockchain analytics firm Elliptic, the hackers sent about $80.3 million worth of Ether (ETH) via Tornado Cash. “Maintaining financial privacy is essential to preserving our freedom; however, this should not come at the expense of non-compliance,” said the Tornado Cash team.

Tornado Cash is a popular cryptocurrency mix used to obfuscate the trace of transactions for privacy reasons. The Chainalysis Sanctions Oracle can validate whether a cryptocurrency wallet address is included in a United States, European Union, or United Nations sanctions designation. But Tornado Cash co-founder Roman Semenov later cleared that the instrument only blocks access to the interface of the decentralized application or DApp and not to the underlying smart contract.

There have been traces of Tornado Cash in several controversial decentralized finance activities. In February’s $375 million wormhole exploit, hackers experimented with Tornado Cash using stolen funds. In the same month, the LooksRare team also partially leveraged Tornado Cash to cash out over $30 million in crypto. A recent Rare Bears Discord phishing attack that stole $800,000 in non-fungible tokens (NFTs) also involved hackers, who funneled the stolen funds through Tornado Cash. Reports also surfaced that funds from a $33 million exploit were being laundered by Crypto.com via the DApp.

However, it seems that Semenov has had enough of the protocol’s association with alleged illegal activities and is discussing the potential consequences of a prison sentence for failure by regulators to block access to blacklisted individuals.