$500,000 worth of the Dai stablecoin, stolen last year, is being sent through the notorious mixer.

Crypto mixer Tornado Cash once again finds itself as the nexus of stolen tokens from a decentralized finance (DeFi) protocol, as PeckShield has spotted $500,000 of Dai moving through its pipes.

Crypto mixers are protocols that obscure the destination of tokens making them harder to track. In August 2021, crypto fundraising platform Dao Maker (not related to Maker DAO) suffered a hack that resulted in the loss of $7 million in various stablecoins and ether.

Immediately after the 2021 hack, on-chain data shows that the funds were sent to two wallets. One of the wallets sent approximately 3800 ether ($6.2 million) to Tornado Cash. The other wallet, which held the balance, remained dormant until today according to on-chain data.

Earlier this year Tornado Cash was used to mix $15 million in ether, stolen from Singapore-based Crypto.com.

Tornado Cash’s frequent nexus to stolen funds triggered a debate if its complicit in money laundering, with its founder saying that the protocol isn’t controlled by any single entity and is designed to be unstoppable.

In August, the US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash prohibiting all US persons and entities from interacting with the protocol.

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Multiple arrests have not been ruled out by the Netherlands’ Fiscal Information and Investigation Service

A 29-year-old developer, suspected of being involved in the sanctioned Tornado Cash protocol, has been arrested in Amsterdam on Friday, according to a release by the Fiscal Information and Investigation Service (FIOD).

FIOD began investigations in June, multiple arrests have not been ruled out.

The investigation is led by the Public Prosecutor’s Office for serious fraud, environmental crime and asset confiscation.

On Monday, Tornado Cash was placed on the OFAC sanctions list by the U.S.

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Over 5,505 ether connected to the Ronin exploiter address seem to be on the move via privacy exchange Tornado Cash, blockchain data shows.

Addresses connected to Ronin Bridge’s $625 million exploit show upward of $10 million worth of ether were on the move in Asian morning hours on Wednesday, as per blockchain data.

One address was funded by the Ronin exploiter this morning for 5,505 ether, with the funds coming in from another wallet that was directly funded by the main exploiter address, blockchain data shows.

Starting in the wee hours on Wednesday, the address sent ether in batches of 100 to Tornado, an on-chain privacy exchange. Over 55 transactions were made, the data shows.

The wallet contains just 3.4 ether – valued at over $7,000 – at writing time, suggesting most of the funds were transferred to Tornado and sold.

Tornado enhances the privacy of transactions by breaking the on-chain link between a source and a destination address. This allows exploiters and hackers to mask their addresses while withdrawing illicitly gained funds.

Wednesday’s moves follow the aggressive selling of stolen ether in early April, when the exploiters moved as much as 21,000 ether over several transactions to Tornado. The stash was valued at over $65 million at the time.

Ronin Network was hit by a $625 million exploit in March that affected Ronin validator nodes for Sky Mavis, the publisher of the popular Axie Infinity game, and the Axie DAO. The attacker “used hacked private keys in order to forge fake withdrawals,” Ronin said in a blog post at the time, explaining the exploit.

U.S. officials have previously tied the exploiter address to North Korea’s infamous “Lazarus” group. CoinDesk independently confirmed the sanctioned addresses were linked to Ronin exploiters, as reported.

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The blockade only applies to the Tornado Cash front-end, not the underlying smart contract, one of the protocol’s founders later tweeted.

In a move that raised the eyebrows of crypto privacy wonks, coin mixer Tornado Cash said Friday it is using a tool developed by compliance firm Chainalysis to block crypto wallets sanctioned by the U.S. Office of Foreign Assets Control (OFAC).

However, the blockade only applies to the user-facing decentralized application (dapp), not the underlying smart contract, one of the protocol’s founders later tweeted.

The coin mixer, which claims to defend people’s financial privacy, has often been used to obfuscate the trail of crypto obtained through hacks.

The protocol’s founder has previously said that it is “technically impossible” to enforce sanctions on decentralized protocols like Tornado Cash. “There’s not much we can do,” he said in a March interview.

The half-measure of restricting front-end access is not new, however.

A former DEA agent told CoinDesk in January that Tornado Cash complies with OFAC’s list of sanctioned crypto wallets. The announcement Friday follows Thursday’s news that North Korean hackers were alleged by U.S. authorities to be behind the $625 million exploit of Axie Infinity’s Ronin blockchain.

The Ronin hackers “have so far sent $80.3 million worth of ETH through Tornado Cash,” tracing firm Elliptic wrote Thursday.

“The fact that Tornado Cash doesn’t allow access to its app to comply with regulations doesn’t necessarily mean that the protocol and smart contracts are not available to the sanctioned entities,” Tal Be’ery, the chief technology officer of crypto wallet ZenGo, told CoinDesk in a direct message.

OFAC is a U.S. government body responsible for enforcing economic sanctions to support national security and foreign policy. It maintains a list of crypto wallets tied to sanctioned individuals and entities.

The Chainalysis oracle for sanctions compliance is a free smart contract that scans for crypto wallets that are sanctioned by various governments. The sanctions-screening tool was launched in March against the backdrop of Russia’s invasion of Ukraine.

“Now is the time for the industry to demonstrate that blockchains’ inherent transparency make cryptocurrency a powerful deterrent to sanctions evasion,” Chainalysis CEO Michael Gronager said at the time, adding:

“In anticipation of ongoing sanctions, we’ve prioritized the development of these tools so that all cryptocurrency market participants have what they need to harness this transparency and conduct basic sanctions screening at no cost to them.”

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The stash is worth over $65 million at the time of writing.

The entity behind Ronin’s unprecedented $655 million exploit in March has apparently moved tens of millions worth of stolen ether (ETH) through privacy protocol Tornado Cash in the past week, blockchain data from addresses connected to the exploiter show.

Activity over the past week from the exploiter’s main address – tagged Ronin Bridge Exploiter on tracking service Etherscan – apparently shows that over 21,000 ether was moved in several transactions to different wallets.

Data show these funds were then moved to privacy exchange Tornado Cash. The exploiter seemed to have made several trades of 100 ether each from all those wallets, data apparently shows.

Transfers to Tornado Cash were done in amounts of 100 ether, as this wallet show. (Etherscan)

The funds moved to Tornado Cash are worth upward of $65 million at current prices.

Tornado enhances the privacy of transactions by breaking the on-chain link between a source and a destination address. This allows exploiters and hackers to mask their addresses while withdrawing illicitly gained funds.

Transfer amounts out of the main wallet range from 1,000 ether to this morning’s 3,202 ether, the highest so far.

Some wallets, such as 0xdf225C84A0eAEAaAC20E6C1d369e94EE13B9dF2A, saw multiple ether deposits from the exploiter. Others like 0x429a66e7bD829F9453CEE5239Bfeaf5657A11A3e have seen just one deposit.

The main wallet continues to hold upwards of 151,055 ether, worth $461 million at current prices, at the time of writing.

Ronin Network was hit by a $625 million exploit in March that affected Ronin validator nodes for Sky Mavis, the publisher of the popular Axie Infinity game, and the Axie DAO.

The attacker “used hacked private keys in order to forge fake withdrawals” from the Ronin bridge across two transactions, as seen on Etherscan, Ronin said in a blog post on Substack.

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