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Federal Authorities Charge Men with Money-Laundering Scheme Involving Cryptocurrency

Federal authorities have brought charges against two men accused of operating a large-scale money-laundering operation that handled over $1 billion in illegal transactions. The scheme allegedly involved moving hundreds of millions of dollars worth of cryptocurrency for North Korean hackers associated with the country’s government. The charges were filed in Manhattan federal court against Roman Storm, a Washington state resident, and his business partner Roman Semenov, a Russian citizen. The two are accused of using their cryptocurrency “mixer” service, called Tornado Cash, to launder money and violate sanctions on behalf of the Lazarus Group, a North Korean cybercrime organization.

According to authorities, Storm and Semenov promoted their business as a privacy-focused financial service, but in reality, they knowingly facilitated the concealment of illicit funds. Such mixing services, which allow for the obfuscation of funds’ origins, are increasingly popular among cybercriminals seeking to hide and move illegal profits. However, FBI Director Christopher A. Wray emphasized that these criminals are not untraceable, stating, “You can’t hide from us behind a keyboard—whether you’re a hacker or a facilitator.”

Amid the investigation, Brian Klein, Storm’s lawyer, expressed disappointment with the prosecutors’ decision to charge his client. He stated that Storm had developed software and argued that the legal theory applied in his case could set dangerous precedents for all software developers. Klein asserted Storm’s cooperation with the investigation and maintained his client’s innocence regarding any criminal actions.

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In recent years, the Justice Department has ramped up efforts to combat criminals employing cryptocurrencies to hide assets and evade law enforcement. This pursuit spans globally and involves substantial sums of money. While the use of cryptocurrency can make money laundering more challenging to trace, the FBI’s New York office head, James Smith, noted that law enforcement agencies are becoming increasingly adept at uncovering these hidden financial systems.

The indictment reveals that Storm, Semenov, and an unidentified third founder established Tornado Cash with a $900,000 investment from a California-based venture capital fund. The document also suggests that when the founders proposed creating a compliant version of their service adhering to anti-money laundering and know-your-customer regulations, the venture capital investors dismissed the idea. Storm and Semenov allegedly allowed the Lazarus Group to launder money for the North Korean government in early 2022. Storm has been arrested, while Semenov remains at large.

The charges filed against Storm and Semenov include conspiracy to commit money laundering, conspiracy to violate U.S. sanctions, and conspiracy to operate an unlicensed money transmitting business. If convicted on the most serious charge, they could face up to 20 years in prison.

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