OKX Blows Away Tornado Cash Users with Account Terminations, Says No More

Key Takeaways

• Crypto exchange OKX decided to crack down on Tornado Cash amid user backlash and several regulatory scrutinies.
• Tornado Cash continues to face increasing scrutiny from regulatory bodies worldwide.
• The conviction of Tornado Cash co-founder Alexey Pertsev highlights the severe legal risks associated with operating such a service.

OKX Blows Aways Tornado Cash

OKX has taken a hard stance against users interacting with Tornado Cash and other sanctioned entities. The exchange has announced it will terminate all accounts linked to these services to enhance platform security and comply with international sanctions.

CEO Star Xu emphasized the growing concern over scams and illicit activities involving Tornado Cash. He stated that the exchange has a strong commitment to maintaining financial integrity. Due to the exchange’s risk management protocols, any deposits or withdrawals from sanctioned entities like Garantex and Tornado Cash will trigger account closure.

“We are required to comply with applicable sanctions policies, including US sanctions,” Xu said.

A public call from a user known as Satoshi Friends has prompted a crisis for OKX. The user issued a dire warning to their community and users from CIS countries to immediately withdraw all funds from the platform and permanently suspend their accounts.

Tornado Cash Problems

A Federal Reserve Bank of New York  study revealed that Ethereum participants are increasingly reluctant to process transactions via Tornado Cash, especially after a US court ruling upheld sanctions against the platform.

After the US banned Tornado Cash  in August 2022, usage dropped significantly for over a year but has begun to rise again this year. The dollar value in the protocol has returned to pre-sanction levels, driven by rising asset values, but the amount of Ether (ETH) deposited is still about two-thirds of what it was before the sanctions.

The researchers noted that block composers—who select and validate transactions—are particularly hesitant about sanctions compliance. Validators appear less concerned, highlighting a divide in attitudes. Tornado Cash transactions may continue as long as some block composers and validators operate outside US jurisdiction. However, increased friction diminishes the service’s attractiveness.

“We demonstrate that although Tornado Cash transactions continue to be settled, censorship resistance appears more tenuous than the transaction volume suggests,” the researchers said.

Latest Dutch Issues

The OKX case is just the latest episode in Tornado Cash’s complex life. In May 2024, a Dutch court convicted Alexey Pertsev, Tornado Cash’s co-founder, of money laundering and sentenced him to five years and four months in prison.

Prosecutors argued that Tornado Cash facilitated the laundering of $1.2 billion in cryptocurrency stolen through at least 36 hacks. These include over $600 million from the game Axie Infinity in March 2022 and approximately $275 million from the crypto exchange Kucoin. Both hacks have been attributed to North Korea’s Lazarus Group hackers.

About the Author

Giuseppe Ciccomascolo

Giuseppe Ciccomascolo began his career as an investigative journalist in Italy, where he contributed to both local and national newspapers, focusing on various financial sectors. Upon relocating to London, he worked as an analyst for Fitch's CapitalStructure and later as a Senior Reporter for Alliance News. In 2017, Giuseppe transitioned to covering cryptocurrency-related news, producing documentaries and articles on Bitcoin and other emerging digital currencies. He also played a pivotal role in establishing the academy for a cryptocurrency exchange website. Crypto remained his primary area of interest throughout his tenure as a writer for ThirdFloor.

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