> Authorities allege that Storm and Semenov knowingly allowed the Lazarus Group to launder money on behalf of the North Korean government in the spring of 2022.
Hard to have any positive viewpoint on these guys if this turns out to be true.
the 'knowingly allowed' wording suggests LG literally asked them for permission to launder money on behalf of NK and these guys were like of course sure here you go, we've enabled money laundering for your account. pretty hard to believe by my standards.
it's more likely LG simply used Tornado Cash just like any other user.
This is very alarming and a very overreaching thing by the government. These men wrote an open source protocol (smart contract) which was used by random folks to "also" launder money. Its like arresting Tor developers because people host illegal content on it. Leaving this here for more details and reference:
Different laws come into play when your platform targets monetary transactions as opposed to general purpose data transactions. Tor operates in an entirely different legal landscape.
Huh? They were running tornado cash which existed for the sole purpose of laundering money. This isn't at all reaching, if your bank down the street started shredding records for deposits in order to transact with drug dealers, they would also be arrested.
Curious, what do you think about breaking the laws of authoritarian countries to save people's lives? Do you think people should be allowed to do that or not?
The police employed by authoritarian countries? Yes, though I don’t think corrupt officials should take bribes.
The judges employed by those countries who recognize necessity as an excuse for what is otherwise a crime? Yes, though now the law seems less authoritarian.
Like should they be allowed (i.e., have a possibility) to financially support opposition, journalists, etc.? Should the persecuted minorities (LGBT, etc) be able to hide their actions that may reveal them? Or should they be able to leave the country without revealing such plans to authorities in advance? And so on.
It's relevant because a privacy in finance (i.e., "breaking the laws") is important for those people. So I'm curious what the KidComputer thinks about this.
I think you're both ignoring one key factor here: intent.
If this was simple service for moving/spending money privately. Sure, probably nothing wrong then. But the indictment specifically states that they knew the service was being using by sanctioned entities and didn't try to prevent it. That's makes a big difference.
They knew that because it's a public information and they didn't prevent it because it's already deployed smart contract. They have no ability to prevent a specific party from using it, it's already deployed to the network and note that it's still impossible to change it even now.
As an example, since now it's under US agencies control and they know that sanctioned entities are using it, why they still don't try to prevent it? Are they supporting NK?
Fair enough. But the indictment reads as if they were knowingly profiting off of illegal transactions and we may be looking at the case where that line in the sand is drawn.
As a counter example, should the US government not try to stop the cartels from using Swiss banks for money laundering because some arbitrary contract was already in effect?
In other words: Monero might be getting some friends on the Fed's crypto blacklist over this case.
"contract" is a wrong term, that's what I always arguing, because it has nothing to do with the legal meaning of the term. Here it's a public (i.e., "deployed") code. It just exists.
Regarding "profiting", it is a good question, and that's what I don't understand in this case. To my understanding there is no direct fees in Tornado Cash. But there are Relays, which, to my understanding, allow to withdraw to a fresh address and take a small fee for that. Anyone can run a Relay, and the use is optional. I think those guys were running one of them too.
A Relay doesn't know who is who and cannot limit withdrawals of money deposited by a sanctioned entity. But as they were told that some of transactions are likely illicit, even though they don't know which particular, they knowingly profiting off it in general. That's very broad and later can be applied to anyone.
Similar can be applied to mining. In general ETH, miners do know the addresses and they do not accept transactions that include sanctioned addresses. So they are fine. But for Monero example, it's the same problem. Even though they don't know the transactions participants, they may make profits off illegal transactions.
Ignoring that I think you're grossly understating their involvement, if you want to focus on only their development efforts, this is FAR closer to the people that made diesel tuners to facilitate removing emissions equipment.
There's no legitimate reason for those to exist. Or this.
No they wouldn't, how naive are you? they'd get fined a small fraction of the amounts they likely earned for the crime. [1,2,3] + 10 others from one bing search.
If you start a company and take investment and rake in money without AML controls then you're going to have a bad time.
Don't want to be arrested? Pretty simple: Either live in Russia or don't start a company to make money off of money laundering. Or just build the open-source software without trying to make money off of it.
What if you could create a smart contract / protocol / service whatever it was. That's not a company. It's just software, anybody can use it for any reason. It could be possible that people use it to launder money, or they could not. But when people use it you get paid. Like a creators skim from every transaction. But you don't really have any control over who uses it or whatnot.
To the best of my knowledge, most real estate agencies don't deal in cash transactions (as in "bags of"). Money is transferred from bank to bank. The banks have the responsibility to uphold KYC (know your customer) and AML (anti-money laundering) rules. By the time a real-estate agent and vendor get it, the money has already been washed.
No, they definitely don't want to be in Russia because Tornado cash was used to make donations to Ukranian army (because the donators don't want to go to jail, since it's illegal). So Russia would be happy to jail the developers of that service.
Previously: Tornado Cash Founders Charges with Money Laundering[0](5pts, 0 comments, 1 day ago), Tornado Cash devs charged with laundering more than $1B[1](110pts, 113 comments, 1 day ago), Tornado Cash founders charged with laundering more than $1B[2](2pts, 0 comments, 12 hours ago), U.S. Charges Two Alleged Founders of Tornado Cash with Money Laundering[3](1pt, 0 comments, 5 hours ago)
At one point, when the founders suggested they create a version of the service that would adhere to federal anti-money-laundering and know-your-customer rules, the investors at the venture capital fund “dismissed the idea,” the indictment says. One of them allegedly wrote “it would be unlikely that as a fund we’d use a ‘compliant mixer.’”
Blockchains transactions are public, which makes tracking individuals and the parties they conduct those transactions somewhat straightforward. Mixers take coins from various wallets, "mix" them through various methods, then transfer them to another wallets. This is meant to obscure the link between the original source of the coins and their ultimate destination.
The WaPo's title is deceptive. It should be "Men charged with laundering more than $1B using cryptocurrency."
Honestly that would not have caused me to read the article. I clicked because I didn't really know what laundering cryptocurrency itself would involve, except a "washing machine" site (which is of course this is). I was hoping to learn something new.
The way to win with a washing machine is to run one, and then when the volume gets high enough just take all the crypto for yourself -- by definition you'd be untraceable, just as your customers wanted.
Excuse the maybe stupid question, but what does "laundering cryptocurrency" mean? Isn't half the point of the whole crypto thing that it doesn't need this circus to be untraceable?
No, crypto is pseudonymous, not anonymous. The whole point of cryptos that aren't monero is that every transaction ever is visible to everyone all the time. That's the point. Not one central person keeping the ledger of transactions, but everyone so everyone can verify. So no, explicitly the entire system relies on absolute traceability for every dollar in the system, from provenance as a mining reward to its current owner.
There are ways to maintain anonymity in this environment, zero knowledge maths, mixers like tornado cash, but as far as basic systems, the absolute opposite is true.
53 comments
[ 4.8 ms ] story [ 103 ms ] threadHard to have any positive viewpoint on these guys if this turns out to be true.
it's more likely LG simply used Tornado Cash just like any other user.
https://rnikhil.com/2022/08/09/tornado-cash-block.html
The police employed by authoritarian countries? Yes, though I don’t think corrupt officials should take bribes.
The judges employed by those countries who recognize necessity as an excuse for what is otherwise a crime? Yes, though now the law seems less authoritarian.
INTERPOL? Depends on the law.
———————————-
How does this relate to the topic a hand?
Like should they be allowed (i.e., have a possibility) to financially support opposition, journalists, etc.? Should the persecuted minorities (LGBT, etc) be able to hide their actions that may reveal them? Or should they be able to leave the country without revealing such plans to authorities in advance? And so on.
It's relevant because a privacy in finance (i.e., "breaking the laws") is important for those people. So I'm curious what the KidComputer thinks about this.
If this was simple service for moving/spending money privately. Sure, probably nothing wrong then. But the indictment specifically states that they knew the service was being using by sanctioned entities and didn't try to prevent it. That's makes a big difference.
As an example, since now it's under US agencies control and they know that sanctioned entities are using it, why they still don't try to prevent it? Are they supporting NK?
As a counter example, should the US government not try to stop the cartels from using Swiss banks for money laundering because some arbitrary contract was already in effect?
In other words: Monero might be getting some friends on the Fed's crypto blacklist over this case.
Regarding "profiting", it is a good question, and that's what I don't understand in this case. To my understanding there is no direct fees in Tornado Cash. But there are Relays, which, to my understanding, allow to withdraw to a fresh address and take a small fee for that. Anyone can run a Relay, and the use is optional. I think those guys were running one of them too.
A Relay doesn't know who is who and cannot limit withdrawals of money deposited by a sanctioned entity. But as they were told that some of transactions are likely illicit, even though they don't know which particular, they knowingly profiting off it in general. That's very broad and later can be applied to anyone.
Similar can be applied to mining. In general ETH, miners do know the addresses and they do not accept transactions that include sanctioned addresses. So they are fine. But for Monero example, it's the same problem. Even though they don't know the transactions participants, they may make profits off illegal transactions.
There's no legitimate reason for those to exist. Or this.
No they wouldn't, how naive are you? they'd get fined a small fraction of the amounts they likely earned for the crime. [1,2,3] + 10 others from one bing search.
[1]https://www.theguardian.com/world/2012/jul/21/drug-cartels-b...
[2]https://www.theguardian.com/world/2011/apr/03/us-bank-mexico...
[3]https://money.cnn.com/2018/02/08/news/rabobank-mexico-drug-m...
If you start a company and take investment and rake in money without AML controls then you're going to have a bad time.
Don't want to be arrested? Pretty simple: Either live in Russia or don't start a company to make money off of money laundering. Or just build the open-source software without trying to make money off of it.
Funny because real estate agencies across the western world rake it in without fear.
At all times relevant to this Indictment, ROMAN STORM, the defendant, was a naturalized United States citizen who resided in the United States
[0]: https://news.ycombinator.com/item?id=37240901 [1]: https://news.ycombinator.com/item?id=37242043 [2]: https://news.ycombinator.com/item?id=37247966 [3]: https://news.ycombinator.com/item?id=37253522
At one point, when the founders suggested they create a version of the service that would adhere to federal anti-money-laundering and know-your-customer rules, the investors at the venture capital fund “dismissed the idea,” the indictment says. One of them allegedly wrote “it would be unlikely that as a fund we’d use a ‘compliant mixer.’”
The number of people who would pay to have their money anonymized for purely legal reasons isn't zero, but it seems less likely to be a going concern.
Crypto coin laundries.
The investment being referred to seems to have been into the "Peppersec Inc" entity.
They're anonymized this way in the indictment and online listings don't seem to list this mystery funder.
Honestly that would not have caused me to read the article. I clicked because I didn't really know what laundering cryptocurrency itself would involve, except a "washing machine" site (which is of course this is). I was hoping to learn something new.
The way to win with a washing machine is to run one, and then when the volume gets high enough just take all the crypto for yourself -- by definition you'd be untraceable, just as your customers wanted.
No, crypto is pseudonymous, not anonymous. The whole point of cryptos that aren't monero is that every transaction ever is visible to everyone all the time. That's the point. Not one central person keeping the ledger of transactions, but everyone so everyone can verify. So no, explicitly the entire system relies on absolute traceability for every dollar in the system, from provenance as a mining reward to its current owner.
There are ways to maintain anonymity in this environment, zero knowledge maths, mixers like tornado cash, but as far as basic systems, the absolute opposite is true.