Now Authorities Are Going After Tornado Cash Developers

The war on crypto is expanding from blacklisting source code to the Netherlands criminal financial authorities arresting one of the developers of Tornado Cash.

The Fiscal Information and Investigation Service (FIOD), said Friday they arrested a 29-year-old man in Amsterdam. They didn’t reveal his identity but said he is a developer involved in the Ethereum coin mixer Tornado Cash. The FIOD said in their statement more arrests may be coming in the case.

Earlier this week we reported that the U.S. Treasury Department’s Office of Foreign Assets Control added Tornado Cash and associated addresses to its universal sanctions list, the List of Specially Designated Nationals and Blocked Persons (SDN), which is normally reserved for rogue nations, terrorist masterminds, “enemy” oligarchs and drug kingpins. The impact of that?

Due to sanctions, it became illegal for any U.S. persons and entities to interact with Tornado Cash’s smart contract addresses. Penalties for willful noncompliance can range from fines of $50,000 to $10,000,000 and 10 to 30 years imprisonment.

Given the cozy Dutch-U.S. relationship, we have to assume these actions are coordinated. The Dutch FIOD’s announcement even cited the Treasury action. The U.S. Treasury’s action is dangerous for a variety of reasons we have cited. In particular, it appears the US is violating a long-standing federal court ruling that designated source code for encryption as constitutionally protected free speech.

This action by Dutch authorities is a clear attempt to generate a chilling effect throughout the whole industry. It’s a warning that private, anonymous financial transactions won’t be allowed and they’ll go after coders just as they would criminal money launderers and terrorists.

The crypto industry needs to get out in front of these actions and push back before authorities start using these rogue actions as precedent for even more overreach.