Tornado Cash is an Ethereum-based service that hides users’ deposits and withdrawal activity through the implementation of zero-knowledge proofs.
It was noted that an undisclosed number of users’ accounts that were blocked “never directly engaged with Tornado Cash, and often such users do not realize the origin of the funds transferred to them.”
The project has since amended its compliance policies to better identify the specific fraudulent accounts, and filter out unknowing users who may have received Tornado-adjacent funds.
Besides Tornado Cash, addresses associated with ransomware, malware, sexual content related to minors, and wanted criminals would also be flagged, according to the blog post published Thursday.
Decrypt reached out to dYdX for a comment on the story, but didn’t receive a response at the time of publication.
Tornado Cash was blacklisted by the U.S. Treasury Department on Monday for allegedly facilitating money laundering activities to the tune of $7 billion since 2019.
Some of those alleged funds were derived from the $100 million Harmony Protocol hack by North Korea-based firm Lazarus Group in late June, as well as $7.8 million from the Nomad bridge breach last week, among others.
The Treasury’s move has sparked an outcry in the crypto community, a demographic acutely aware of privacy rights.
“I don’t think it was appropriate at all,” Ethereum core developer Preston Van Loon toldDecrypt. “Tornado Cash is a tool, like any other, that can be used for bad and good.”
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