Banned crypto mixer Tornado Cash has witnessed a surprising uptick in deposit volume in the first half of 2024, despite ongoing sanctions and continued legal strife for its founding team. 

According to data from Flipside Crypto, Tornado Cash has received some $1.9 billion in deposits in the first six months, a significant 50% increase from the total number of deposits through the entirety of 2023.

The Office of Foreign Assets Control (OFAC) officially sanctioned Tornado Cash in August 2022 after it was revealed that the North Korean hacking consortium Lazarus Group had used the protocol to launder around $455 million in illicit funds.

Tornado Cash sees $1.9B resurgence this year despite sanctions image 0 Tornado Cash deposits have jumped after more than a year of low activity. Source: Flipside Crypto

The OFAC sanctions mean that anyone who interacted with the protocol would be placed on a “blacklist” — banning their wallet from being accepted at all legally compliant crypto exchanges.

In short, any wallet that had interacted with the protocol would find it extremely difficult to withdraw that crypto into fiat from an OFAC-compliant centralized exchanges.

Despite these sanctions, the mixing service remains a popular destination for large hacking groups looking to obfuscate the flow of ill-gotten funds.

According to data from blockchain analytics firm Arkham Intelligence, the hacker behind the $100 million Poloniex exchange exploit has transferred $76 million to the mixer since May.

Additionally, the nefarious entities behind the HECO Bridge and Orbit Chain exploits shifted $166 million and $48 million respectively to the mixer through the first half of the year.

More recently, one of the confirmed wallet addresses used in the $235 million hack of Indian crypto exchange WazirX on July 18, was funded by way of a Tornado Cash deposit.

Tornado Cash sees $1.9B resurgence this year despite sanctions image 1 Ether remains the most popular crypto asset used on the mixing protocol. Source: Flipside Crypto

Several figures from the crypto industry have been challenging the Tornado Cash sanctions through an ongoing lawsuit, first filed in 2022.

The plaintiffs argued that sanctioning Tornado Cash is “unlawful and unconstitutional” as the anonymous mixing service cannot be viewed as a country or an “entity” and that blocking it violates the right to free speech under the US Constitution.

Related: Tornado Cash developer Alexey Pertsev denied bail while preparing appeal

The lawsuit has since been backed by several large crypto firms including Coinbase, and crypto advocacy groups The Blockchain Association and Coin Center, who also claim the sanctions are unlawful.

But the US Treasury says crypto mixers are a national security threat and Tornado Cash repeatedly failed to create controls to stop money laundering.

Meanwhile, the three co-founders of Tornado Cash, Alexey Pertsev, Roman Storm, and Roman Semenov have faced challenges following the legal and regulatory crackdown on their mixing protocol.

Alexey Pertev was sentenced to five years and four months in Dutch prison after being convicted on money laundering charges in 2023.

Roman Storm was arrested in the United States in August on money laundering charges and subsequently pleaded not guilty to all charges.

He was released on a $2 million bond shortly after his arrest and since filed a motion to dismiss all charges on March 31.

The third co-founder Roman Semenov remains at large.

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