The government agency has already placed sanctions on Blender and Tornado Cash, two cryptocurrency mixers, even though a lot of people in the industry are resisting measures taken against software.
The Office of Foreign Assets Control (OFAC) of the US Treasury Department placed restrictions on cryptocurrency mixer Sinbad, claiming the platform was in charge of money laundering for the hacking organization Lazarus, which is based in North Korea. The OFAC reported on November 29 that Sinbad had “processed millions of dollars’ worth of virtual currency from Lazarus Group heists,” referring to the hacks of Horizon Bridge in June 2022, Axie Infinity’s Ronin Bridge in March 2022, and Atomic Wallet in June 2023.
At the time, the cumulative loss from the hacks was estimated to be $820 million. Wally Adeyemo, deputy secretary of the Treasury, stated that “mixing services that enable criminal actors, such as the Lazarus Group, to launder stolen assets will face serious consequences.” “The Treasury Department is prepared to use all of the resources at its disposal to stop virtual currency mixers like Sinbad from supporting illegal activity,” according to the department and its allies in the US government.
The Sinbad website was taken over by the Federal Bureau of Investigation, the U.S. Department of Justice, the Public Prosecution Service and Fiscal Information and Investigation Service of the Netherlands, and the National Bureau of Investigation of Finland as of November 29. Treasury went on to say that the goal of the sanctions was “to bring about a positive change in behavior, not to punish.”
Tornado Cash and Blender are two cryptocurrency mixers that OFAC has previously sanctioned; the Treasury claimed that Blender also laundered money for Lazarus. Based on on-chain behavior, risk management company Elliptic stated in February that it was “highly likely” that Sinbad and Blender were the same company—possibly rebranding in an effort to get around penalties.
It’s unclear how the Sinbad sanctions may affect investors in the cryptocurrency market. A group of people supported by the cryptocurrency exchange Coinbase sued the U.S. Treasury after Tornado Cash was shut down, arguing the federal agency had overreached its bounds.
After a move for summary judgment, a judge found in favor of Treasury; however, users appealed the decision in November.