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Banning a service because it "might be used for illegal purposes" is insufficient. This is a problem with law enforcement in general: they are lazy and seek to

by mikece 4y ago

Banning a service because it "might be used for illegal purposes" is insufficient. This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. I would rather money-launderers get away with things and for freedom to prosper than to have an all-encompassing surveillance state.

cguess 4y ago
It was used for tumbling, to the tune of $450m by the North Koreans. It's not a theoretical situation.
- mikece 4y ago
  And yet, somehow, we knew exactly who was doing it. Why the urgency to shut it down?
  - belval 4y ago
  - nh23423fefe 4y ago
    You could just read what treasury wrote and argue with facts instead of vague rhetoric about lazy law enforcement > “Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.” https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
    - DennisP 4y ago
      There are two Tornado Cash entities: one is made of people, and the other is autonomous code running on chain. The OFAC action confuses those two, and it's not clear they have the authority to sanction code. For much more on this, see the legal analysis by Coincenter: https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-entity-in-the-tornado-cash-case/ https://www.coincenter.org/analysis-what-is-and-what-is-not-... Note that FinCEN does pay attention to this sort of distinction, and says that software providers are not subject to money laundering regulation.
  - wil421 4y ago
    Why should North Korea be allowed to steal and hack from other country’s people and organizations? It should be shut down immediately. I feel like your trying to say NK and Tornado should be able to do illegal activities that harm people. Just because you don’t like the police or something.
    - mikece 4y ago
      The very fact (or assumed fact) that we know North Korea is using this undercuts the argument that we need to shut this down because it allows for anonymous money laundering. (By definition: the only way money laundering can be "dangerous" is if it cannot be detected or the players identified.)
      - yunohn 4y ago
        No, in this, the authorities had the time/money to track down the hackers. The vast majority of tornado transactions are mostly illegal, but nobody cares enough to spend their efforts on them.
        x86x87 4y ago
        What a world we are living in. Mostly illegal. Huh. Do you have any data to back this claim? Also, should banks be banned if their customers are doind shady things outside of using their services?
        polygamous_bat 4y ago
        If it's a mafioso bank used mostly by the mafia, then yes, absolutely, they should be investigated and shut down. As for data, just as a first-order estimate, check out the rekt leaderboard [1] and see how many of the stories end with "and the stolen funds were routed through tornado, fin." If all crypto-adjacent crimes are reported to FBI at some point I am sure they have a much clearer statistics, but even as a civilian you can see that it's not small. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
  - giaour 4y ago
    I don’t follow your logic. Isn’t the whole point of mixers that everyone can see dirty money go in, then the forensic trail stops?
  - amalcon 4y ago
    Let's suppose you have Bob's Traditional Bank. They keep meticulous records, and comply with US government requests for them (regardless of what you think of such practices, let's just say that this particular bank happens to do those things). They also facilitate transactions on behalf of North Korea. Bob's Traditional Bank would be sanctioned here, because transacting with North Korea in that way is what triggers these sanctions. This is why Tornado is being sanctioned. The privacy thing may or may not be illegal, despite its ineffectiveness, but the transacting with North Korea thing definitely is.
- ballenf 4y ago
  And what's the value of drugs trafficked over public highways? Or illegal activity coordinated over SMS? Using volume of illegal activity cannot be the primary factor in categorizing a platform.
  - yunohn 4y ago
    You’re right, a crypto mixer primarily used to launder money or evade taxes is *exactly the same* as highways and SMS.
    - lampshades 4y ago
      - Closi 4y ago
        Let's imagine for a second that I owned a physical bricks-and-mortar business with a shopfront that took physical cash (USD banknotes), then mixed it up in a big laundry machine with banknotes from other customers, and then I give you back some other banknotes which are totally random (less a fee). Let's also say I don't do any Know Your Customer checks (KYC). Do you think that should be legal (like highways and SMS) or illegal (like money laundering)?
      - polygamous_bat 4y ago
        You can literally go through the rekt leaderboard [1] and count how many of the stories end with "and then the funds were routed to tornado cash, fin." It's not exactly a secret, and it doesn't require any specuation. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
      - res0nat0r 4y ago
        ? https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
- sam0x17 4y ago
  If that's the cost of a freer internet that's fine with me. I don't care if it's $10t.
  - x86x87 4y ago
    That's a very limited way of looking at things. You're fine with banning X and Y because you don't see them impacting you. When Z is banned and you care about Z you'll have a rude awakening.
    - nibbleshifter 4y ago
      I think the poster was saying they are fine with that amount if laundry, because its more important for a free internet to exist.
      - x86x87 4y ago
        After rereading I agree with you. It wasn't clear to me whem first reading it.
    - npc54321 4y ago
      It's obvious sam0x17 is against blocking anything.
  - deleted 4y ago
    [deleted]
- whatisweb3 4y ago
  450m is a whopping 6% of all deposits on Tornado Cash[1]. The total percentage of illicit activity on the protocol is reported to be in the 10-30% range[2]. What percentage of activity in an E2EE chat application like Matrix is illicit? If a significant but minority percentage of its use is facilitating criminal discussion, should those open protocols also be sanctioned? [1] https://dune.com/poma/tornado-cash_1 https://dune.com/poma/tornado-cash_1 [2] https://www.eff.org/deeplinks/2022/08/code-speech-and-tornado-cash-mixer https://www.eff.org/deeplinks/2022/08/code-speech-and-tornad...
  - pclmulqdq 4y ago
    This isn't about the fraction of illicit use. A large fraction of Americans with numbered/anonymous Swiss bank accounts did nothing wrong with them - a much larger fraction than tornado cash users. However, they were still banned for US citizens due to US KYC rules. The land of free speech is obsessed with being able to trace money as it travels. No surprise they would go after a service whose explicit purpose is to break the chain of custody on money.
    - bitxbitxbitcoin 4y ago
      Banning the use of Tornado Cash is one thing - I didn’t see any Swiss bankers arrested or prosecuted for money laundering during that move.
      - pclmulqdq 4y ago
        You mean like these Swiss bankers? https://www.reuters.com/article/us-usa-switzerland-tax/ex-swiss-banker-goes-home-after-u-s-loses-extradition-from-germany-idUSKBN13Y23N https://www.reuters.com/article/us-usa-switzerland-tax/ex-sw... https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-charges-swiss-lawyer-and-swiss-banker-conspiring-hide-millions https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-c... https://www.justice.gov/opa/pr/former-ubs-banker-charged-helping-us-taxpayers-use-secret-swiss-bank-accounts-evade-us-taxes https://www.justice.gov/opa/pr/former-ubs-banker-charged-hel... This wasn't mainstream news, but neither was the sanctioning of Tornado cash. You just happened to hear about one but not the other.
jfim 4y ago
How much of it is used for legitimate reasons versus illicit ones? If the overwhelming majority of the transactions are illicit, it makes sense to ban it.
- Wowfunhappy 4y ago
  I agree with you, but I'd like to point out that the same logic could be applied to e.g. game console emulators. ...and as much as I hate to say it, I do think the logic might be correct in both situations. (I say this as a heavy user of console emulators—albeit also as someone who does go through the trouble to legally dump his own games.)
  - criddell 4y ago
    I don't know that it's really an apples-to-apples comparison. Console emulators are a copyright issue and those are generally (but not always) civil matters.
  - jfim 4y ago
    It depends on how you see it. One way to look at it is to say "I derived this rule based on what the ratio of licit to illicit usage is, thus it should apply everywhere." From that perspective, then yes, your observation that it would apply to both situations is correct. Another way to look at it is "for this particular scenario, what is the optimal outcome?" If you're running a game console emulator for a system that's not being sold anymore, with games that are not being sold anymore, one could argue that that scenario would be net positive considering the lack of harm; in other words, you get to enjoy the game, while nobody gets hurt, so it's positive overall. The first perspective is called "rule utilitarianism," while the latter is called "act utilitarianism," in case you want to learn more about those.
- dsr_ 4y ago
  It makes even more sense to allow it, and regulate it. The regulation should be the existing Know Your Customer requirements plus a 100% traceable log subject to inspection, auditing and subpoena.
deleted 4y ago
[deleted]
JustLurking2022 4y ago
It's a service specifically designed to facilitate money laundering. It's a bit like running a business that produces paperwork to make stolen cars indistinguishable from legal ones - there's no reason such a service should be allowed to exist.
- junofan 4y ago
  Can’t law enforcement use search warrants in their own jurisdiction?
- devoutsalsa 4y ago
  So are casinos, banks, money exchanges, and hot dog stands. There are tons of reasons for wanting privacy that have nothing to do with money laundering. Avoiding kidnapping & ransom because someone can’t see the size of your crypto wallet for example.
  - zeusk 4y ago
    You're really saying; banks, money exchanges and hot dog stands have no other utility other than to "wash" money?
    - bitxbitxbitcoin 4y ago
      It’s reductionist but yes - “washing” money is a core part of their function. Note OP didn’t say laundering.
      - woodruffw 4y ago
        No, it isn't. Banks exist to induce stability and liquidity (i.e., the efficient flow of capital) within the economy. Hot dog stands exist to sell hot dogs. Money exchanges exist to transfer currencies to (you guessed it) facilitate commerce in different regions. The hair you're attempting to split between "laundering" and "washing" does not exist in the financial world, and would not impress financial regulators.
speedylight 4y ago
You could also say that Silk Road was an E-commerce business that might’ve been used to sell drugs, who knows!
- x86x87 4y ago
  Not one to defend Silk Road, but pause and think about it for a second: it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) People were breaking stupid laws from the 70s established after mass hysteria around drugs by one of the scummies US president ever. More than that, the tax man was not getting its cut. Now to put things in perspective let's compare to some things US agencies have done in the past: https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_trafficking https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_traf...
  - FireBeyond 4y ago
    > it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) Because there was all sorts of white washing like this. "It's drugs, but safer, and without the violence and crime!" If you think that violence, crime are magically gone because of Silk Road, you'd be considered ignorant or naive. Production still happens in the same places, the poverty, corruption and violence-stricken areas. It's just invisible to you now, because you don't have to worry about your dealer stealing from you, getting mugged, or buying from an unknown source, or being arrested. All those people in Mexican and Colombian villages subject to the tyranny of the cartels... oh well. All good then, I suppose.
    - npc54321 4y ago
      > All those people in Mexican and Colombian villages subject Just go into the frigging villages and arrest the cartel leaders oh wait they are in cohort with the governments of those countries...
Forrest7778 4y ago
It's not a black and white issue; things aren't getting banned because they might be used for illegal purposes, that is even explicitly stated in the article.
woodruffw 4y ago
"Might be used for illegal purposes" is a significant understatement. The chief selling point of Tornado Cash is money laundering, which is in and of itself a crime in both the US and Netherlands. Normally, there'd be an aspect of plausible deniability: torrent index operators can, for example, rightfully claim that they're facilitating legal filesharing, or that they're entirely agnostic to the content being shared (if all they're doing is sharing URLs). What's key in this case is that law enforcement claims that Pertsev was aware of the crimes his service was being used for. Whether or not that's actually true is up to a court to decide.
- TEP_Kim_Il_Sung 4y ago
  The chief selling point of Tornado Cash is that it's distributed open-source software, with no man in the middle, no single point of failure. That's right: Government sanctioned open-source SOFTWARE. Are you sure you want this precedent set?
  - woodruffw 4y ago
    I have no problem with Tornado Cash being openly available software under a permissive license. I have a problem with people running a Tornado Cash-based service that is really just a money laundering service. You should take a step back: "open source" does not rinse away the underlying properties of a service. I can't write and deploy a web application that contracts hitmen and use the MIT license as a defense; the latter simply isn't being litigated.
    - theplumber 4y ago
      What's the difference between money launderying features and privacy features? Tornado Cash in itself does is not launderying money because you still have to prove to the IRS how you got the money or the asset(i.e bills, invoice etc) and you still have to obey KYC rules. You can't just say the money is from Tornado Cash and be done with it. Is the U.S Mint a money launderying service because it provides an untraceable method (cash) to conduct transactions?
ouid 4y ago
You seem to think that freedom means a world in which you are allowed to hide your assets from the government. You have never been allowed to do that. You're going to have to change the law, and because you live in more or less a democracy, you're going to have to convince people that its good to change the law.
- TEP_Kim_Il_Sung 4y ago
  For the time being the government has yet to decide wether crypto is money, a currency, an asset, or a security. Instead it has been going after people for all of them.
  - qeternity 4y ago
    Because crypto claims to be all 3 and has created various forms that behave like all 3.
    - TEP_Kim_Il_Sung 4y ago
      This would hold up if government treated individual forms individually, yet they mix&match arbitrarily.
- bruiseralmighty 4y ago
  History did not start in 1913. Income is not an asset, they have been two different things for longer than the United States has existed as a country. Most governments in recorded history have managed to exist without taxing income. It would in fact be better live in a country with financial privacy where assets form the tax base instead of income. In terms of convincing the public, I think time will do the former and education the later.
marginalia_nu 4y ago
> This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. The flaw with this line of reasoning is that behaviors have changed. In the past, when the police did "police work", people had no choice but to meet in person to discuss their criminal enterprises. You could follow them, and listen in. Many illicit schemes also left a trail of paper that needed to be stored in physical space. It's not that the police have gotten lazy, it's that if you expect criminals to hang out in a shady dockside speakeasy like they did when Al Capone ran the town, you're simply not going to find anything. This is a real tricky problem to which I'm not sure there are good solutions. There's a mounting conflict of interest upholding the law on the one hand, and the interests of law-abiding citizens on the other.
jmyeet 4y ago
You have to remember that access to the US financial system is a privilege not a right. To be granted that privilege, a financial institution has a number of obligations. Thesee include various KYC/AML obligations. So this isn't Tornado Cash "might be used for illegal purposes" so much as it's clear evidence they're failing to meet their legal obligations. There's a larger point here too: as much as proponents tour crypto's extragovernmental status, it would take very little effort by governments to completely cripple any crypto assset in practical terms.
- bruiseralmighty 4y ago
  So proposing a hypothetical. If the only issue here is obligation to the U.S. financial system what if the only on-off ramps to e-coins were cash only? So as an individual, I convert my cash to e-coins through some e-coin dedicated ATM-like machine. And I can redeem my e-coins for cash at another e-coin-ATM somewhere else (maybe anywhere in the world). Would coin pools like Tornado Cash then be acceptable? It would not be tied in any way to the credit or banking systems, it takes cash only, and then just a basic utility internet connection. Maintenance for the machines and paying the internet utility would just be a fraction of a percentage fee on each transaction. Now all e-coins would simply exist as a privacy themed alternative ecosystem to cash. Since we are not joining the U.S. financial system, these e-coins should not be expected to have any obligations to that system correct?
0x_rs 4y ago
Criminals are most certainly going to get away with it regardless of how many restrictions and surveillance you apply to the little people, as they have the means (capital) to do so. I don't want to stretch it too far, but the current rules seem nearly purposefully pointed towards the least effort category. There's quite a lot of coverage on this matter, some (and a lot in the cryptocurrency scene) like to cite works from Ronald F Pol who has done a lot of heavy handed criticism on AML et cetera (as far as claiming less than one percent of real-world regulations effectiveness), these claims can be disputed, but it's apparent even to mainstream publications most unlawful flows are uninhibited and the approach is ineffective, expensive and dangerous. https://www.economist.com/finance-and-economics/2021/04/12/the-war-against-money-laundering-is-being-lost https://www.economist.com/finance-and-economics/2021/04/12/t... https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_scandal https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...
croes 4y ago
Are you sure they are lazy or are they just underfunded and with to few personnel?
- A4ET8a8uTh0 4y ago
  It probably depends. I live in Chicagoland. Cops here are a lot of things, but I can't honestly say they are underfunded. The pension alone is likely worth the risk ( source: couple cops in my extended family ) even if money is not staggering ( and it still not on the low end by any means ). But to go back to the original query. It is just so much more easier to click couple of buttons than go somewhere and ask questions. It is cheaper too. The convenience trumps most of the other reasons. The same goes for privacy. The convenience killed it.
Fnoord 4y ago
If its used for a high percentage of criminal purposes (for example 90%) banning is legitimate. Also, who are these "investors"? They're speculators. When you speculate, there's risk involved. This is one of them. This case is an unnecessary burden on our legal systems, I hope it gets thrown out of court ASAP.
Sir_Liigmaz 4y ago
The USA PATRIOT Act requires every financial institution and money service business have an AML department. There are thousands of people in the US that are paid to look at your bank account and decide if you've been naughty or not and narc to the feds if you have. This is happening everyday. We are already living the surveillance state.
barelysapient 4y ago
At this point, failure to comply with the statute means a violation of law; regardless if any criminal laws were observably broken or not.
davidguetta 4y ago
wait what ? literally the entire point of financial regulations is to avoid it to "possibly be used for illegal purposes". Starting with the very basic KYC regulation, or the fact that in many countries cash transaction above a limit are forbidden. I'm all about privacy and anonymity of transactions personally, but tornado investors going all "surprised pikachu" right now after a more-than-previsible ban is a bit laughable...
jjtheblunt 4y ago
> they are lazy ?
houstonn 4y ago
A question for those in this thread who want to ban a privacy service because it's utilized for unlawful activity: What's your opinion of Tor?

by mikece 4y ago

cguess 4y ago

It was used for tumbling, to the tune of $450m by the North Koreans. It's not a theoretical situation.

mikece 4y ago
And yet, somehow, we knew exactly who was doing it. Why the urgency to shut it down?
- belval 4y ago
- nh23423fefe 4y ago
  You could just read what treasury wrote and argue with facts instead of vague rhetoric about lazy law enforcement > “Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.” https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
  - DennisP 4y ago
    There are two Tornado Cash entities: one is made of people, and the other is autonomous code running on chain. The OFAC action confuses those two, and it's not clear they have the authority to sanction code. For much more on this, see the legal analysis by Coincenter: https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-entity-in-the-tornado-cash-case/ https://www.coincenter.org/analysis-what-is-and-what-is-not-... Note that FinCEN does pay attention to this sort of distinction, and says that software providers are not subject to money laundering regulation.
- wil421 4y ago
  Why should North Korea be allowed to steal and hack from other country’s people and organizations? It should be shut down immediately. I feel like your trying to say NK and Tornado should be able to do illegal activities that harm people. Just because you don’t like the police or something.
  - mikece 4y ago
    The very fact (or assumed fact) that we know North Korea is using this undercuts the argument that we need to shut this down because it allows for anonymous money laundering. (By definition: the only way money laundering can be "dangerous" is if it cannot be detected or the players identified.)
    - yunohn 4y ago
      No, in this, the authorities had the time/money to track down the hackers. The vast majority of tornado transactions are mostly illegal, but nobody cares enough to spend their efforts on them.
      - x86x87 4y ago
        What a world we are living in. Mostly illegal. Huh. Do you have any data to back this claim? Also, should banks be banned if their customers are doind shady things outside of using their services?
        polygamous_bat 4y ago
        If it's a mafioso bank used mostly by the mafia, then yes, absolutely, they should be investigated and shut down. As for data, just as a first-order estimate, check out the rekt leaderboard [1] and see how many of the stories end with "and the stolen funds were routed through tornado, fin." If all crypto-adjacent crimes are reported to FBI at some point I am sure they have a much clearer statistics, but even as a civilian you can see that it's not small. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
- giaour 4y ago
  I don’t follow your logic. Isn’t the whole point of mixers that everyone can see dirty money go in, then the forensic trail stops?
- amalcon 4y ago
  Let's suppose you have Bob's Traditional Bank. They keep meticulous records, and comply with US government requests for them (regardless of what you think of such practices, let's just say that this particular bank happens to do those things). They also facilitate transactions on behalf of North Korea. Bob's Traditional Bank would be sanctioned here, because transacting with North Korea in that way is what triggers these sanctions. This is why Tornado is being sanctioned. The privacy thing may or may not be illegal, despite its ineffectiveness, but the transacting with North Korea thing definitely is.
ballenf 4y ago
And what's the value of drugs trafficked over public highways? Or illegal activity coordinated over SMS? Using volume of illegal activity cannot be the primary factor in categorizing a platform.
- yunohn 4y ago
  You’re right, a crypto mixer primarily used to launder money or evade taxes is *exactly the same* as highways and SMS.
  - lampshades 4y ago
    - Closi 4y ago
      Let's imagine for a second that I owned a physical bricks-and-mortar business with a shopfront that took physical cash (USD banknotes), then mixed it up in a big laundry machine with banknotes from other customers, and then I give you back some other banknotes which are totally random (less a fee). Let's also say I don't do any Know Your Customer checks (KYC). Do you think that should be legal (like highways and SMS) or illegal (like money laundering)?
    - polygamous_bat 4y ago
      You can literally go through the rekt leaderboard [1] and count how many of the stories end with "and then the funds were routed to tornado cash, fin." It's not exactly a secret, and it doesn't require any specuation. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
    - res0nat0r 4y ago
      ? https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
sam0x17 4y ago
If that's the cost of a freer internet that's fine with me. I don't care if it's $10t.
- x86x87 4y ago
  That's a very limited way of looking at things. You're fine with banning X and Y because you don't see them impacting you. When Z is banned and you care about Z you'll have a rude awakening.
  - nibbleshifter 4y ago
    I think the poster was saying they are fine with that amount if laundry, because its more important for a free internet to exist.
    - x86x87 4y ago
      After rereading I agree with you. It wasn't clear to me whem first reading it.
  - npc54321 4y ago
    It's obvious sam0x17 is against blocking anything.
- deleted 4y ago
  [deleted]
whatisweb3 4y ago
450m is a whopping 6% of all deposits on Tornado Cash[1]. The total percentage of illicit activity on the protocol is reported to be in the 10-30% range[2]. What percentage of activity in an E2EE chat application like Matrix is illicit? If a significant but minority percentage of its use is facilitating criminal discussion, should those open protocols also be sanctioned? [1] https://dune.com/poma/tornado-cash_1 https://dune.com/poma/tornado-cash_1 [2] https://www.eff.org/deeplinks/2022/08/code-speech-and-tornado-cash-mixer https://www.eff.org/deeplinks/2022/08/code-speech-and-tornad...
- pclmulqdq 4y ago
  This isn't about the fraction of illicit use. A large fraction of Americans with numbered/anonymous Swiss bank accounts did nothing wrong with them - a much larger fraction than tornado cash users. However, they were still banned for US citizens due to US KYC rules. The land of free speech is obsessed with being able to trace money as it travels. No surprise they would go after a service whose explicit purpose is to break the chain of custody on money.
  - bitxbitxbitcoin 4y ago
    Banning the use of Tornado Cash is one thing - I didn’t see any Swiss bankers arrested or prosecuted for money laundering during that move.
    - pclmulqdq 4y ago
      You mean like these Swiss bankers? https://www.reuters.com/article/us-usa-switzerland-tax/ex-swiss-banker-goes-home-after-u-s-loses-extradition-from-germany-idUSKBN13Y23N https://www.reuters.com/article/us-usa-switzerland-tax/ex-sw... https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-charges-swiss-lawyer-and-swiss-banker-conspiring-hide-millions https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-c... https://www.justice.gov/opa/pr/former-ubs-banker-charged-helping-us-taxpayers-use-secret-swiss-bank-accounts-evade-us-taxes https://www.justice.gov/opa/pr/former-ubs-banker-charged-hel... This wasn't mainstream news, but neither was the sanctioning of Tornado cash. You just happened to hear about one but not the other.

jfim 4y ago

How much of it is used for legitimate reasons versus illicit ones? If the overwhelming majority of the transactions are illicit, it makes sense to ban it.

Wowfunhappy 4y ago
I agree with you, but I'd like to point out that the same logic could be applied to e.g. game console emulators. ...and as much as I hate to say it, I do think the logic might be correct in both situations. (I say this as a heavy user of console emulators—albeit also as someone who does go through the trouble to legally dump his own games.)
- criddell 4y ago
  I don't know that it's really an apples-to-apples comparison. Console emulators are a copyright issue and those are generally (but not always) civil matters.
- jfim 4y ago
  It depends on how you see it. One way to look at it is to say "I derived this rule based on what the ratio of licit to illicit usage is, thus it should apply everywhere." From that perspective, then yes, your observation that it would apply to both situations is correct. Another way to look at it is "for this particular scenario, what is the optimal outcome?" If you're running a game console emulator for a system that's not being sold anymore, with games that are not being sold anymore, one could argue that that scenario would be net positive considering the lack of harm; in other words, you get to enjoy the game, while nobody gets hurt, so it's positive overall. The first perspective is called "rule utilitarianism," while the latter is called "act utilitarianism," in case you want to learn more about those.
dsr_ 4y ago
It makes even more sense to allow it, and regulate it. The regulation should be the existing Know Your Customer requirements plus a 100% traceable log subject to inspection, auditing and subpoena.

deleted 4y ago

[deleted]

JustLurking2022 4y ago

It's a service specifically designed to facilitate money laundering. It's a bit like running a business that produces paperwork to make stolen cars indistinguishable from legal ones - there's no reason such a service should be allowed to exist.

junofan 4y ago
Can’t law enforcement use search warrants in their own jurisdiction?
devoutsalsa 4y ago
So are casinos, banks, money exchanges, and hot dog stands. There are tons of reasons for wanting privacy that have nothing to do with money laundering. Avoiding kidnapping & ransom because someone can’t see the size of your crypto wallet for example.
- zeusk 4y ago
  You're really saying; banks, money exchanges and hot dog stands have no other utility other than to "wash" money?
  - bitxbitxbitcoin 4y ago
    It’s reductionist but yes - “washing” money is a core part of their function. Note OP didn’t say laundering.
    - woodruffw 4y ago
      No, it isn't. Banks exist to induce stability and liquidity (i.e., the efficient flow of capital) within the economy. Hot dog stands exist to sell hot dogs. Money exchanges exist to transfer currencies to (you guessed it) facilitate commerce in different regions. The hair you're attempting to split between "laundering" and "washing" does not exist in the financial world, and would not impress financial regulators.

speedylight 4y ago

You could also say that Silk Road was an E-commerce business that might’ve been used to sell drugs, who knows!

x86x87 4y ago
Not one to defend Silk Road, but pause and think about it for a second: it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) People were breaking stupid laws from the 70s established after mass hysteria around drugs by one of the scummies US president ever. More than that, the tax man was not getting its cut. Now to put things in perspective let's compare to some things US agencies have done in the past: https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_trafficking https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_traf...
- FireBeyond 4y ago
  > it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) Because there was all sorts of white washing like this. "It's drugs, but safer, and without the violence and crime!" If you think that violence, crime are magically gone because of Silk Road, you'd be considered ignorant or naive. Production still happens in the same places, the poverty, corruption and violence-stricken areas. It's just invisible to you now, because you don't have to worry about your dealer stealing from you, getting mugged, or buying from an unknown source, or being arrested. All those people in Mexican and Colombian villages subject to the tyranny of the cartels... oh well. All good then, I suppose.
  - npc54321 4y ago
    > All those people in Mexican and Colombian villages subject Just go into the frigging villages and arrest the cartel leaders oh wait they are in cohort with the governments of those countries...

Forrest7778 4y ago

It's not a black and white issue; things aren't getting banned because they might be used for illegal purposes, that is even explicitly stated in the article.

woodruffw 4y ago

"Might be used for illegal purposes" is a significant understatement. The chief selling point of Tornado Cash is money laundering, which is in and of itself a crime in both the US and Netherlands. Normally, there'd be an aspect of plausible deniability: torrent index operators can, for example, rightfully claim that they're facilitating legal filesharing, or that they're entirely agnostic to the content being shared (if all they're doing is sharing URLs). What's key in this case is that law enforcement claims that Pertsev was aware of the crimes his service was being used for. Whether or not that's actually true is up to a court to decide.

TEP_Kim_Il_Sung 4y ago
The chief selling point of Tornado Cash is that it's distributed open-source software, with no man in the middle, no single point of failure. That's right: Government sanctioned open-source SOFTWARE. Are you sure you want this precedent set?
- woodruffw 4y ago
  I have no problem with Tornado Cash being openly available software under a permissive license. I have a problem with people running a Tornado Cash-based service that is really just a money laundering service. You should take a step back: "open source" does not rinse away the underlying properties of a service. I can't write and deploy a web application that contracts hitmen and use the MIT license as a defense; the latter simply isn't being litigated.
  - theplumber 4y ago
    What's the difference between money launderying features and privacy features? Tornado Cash in itself does is not launderying money because you still have to prove to the IRS how you got the money or the asset(i.e bills, invoice etc) and you still have to obey KYC rules. You can't just say the money is from Tornado Cash and be done with it. Is the U.S Mint a money launderying service because it provides an untraceable method (cash) to conduct transactions?

ouid 4y ago

You seem to think that freedom means a world in which you are allowed to hide your assets from the government. You have never been allowed to do that. You're going to have to change the law, and because you live in more or less a democracy, you're going to have to convince people that its good to change the law.

TEP_Kim_Il_Sung 4y ago
For the time being the government has yet to decide wether crypto is money, a currency, an asset, or a security. Instead it has been going after people for all of them.
- qeternity 4y ago
  Because crypto claims to be all 3 and has created various forms that behave like all 3.
  - TEP_Kim_Il_Sung 4y ago
    This would hold up if government treated individual forms individually, yet they mix&match arbitrarily.
bruiseralmighty 4y ago
History did not start in 1913. Income is not an asset, they have been two different things for longer than the United States has existed as a country. Most governments in recorded history have managed to exist without taxing income. It would in fact be better live in a country with financial privacy where assets form the tax base instead of income. In terms of convincing the public, I think time will do the former and education the later.

marginalia_nu 4y ago

> This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. The flaw with this line of reasoning is that behaviors have changed. In the past, when the police did "police work", people had no choice but to meet in person to discuss their criminal enterprises. You could follow them, and listen in. Many illicit schemes also left a trail of paper that needed to be stored in physical space. It's not that the police have gotten lazy, it's that if you expect criminals to hang out in a shady dockside speakeasy like they did when Al Capone ran the town, you're simply not going to find anything. This is a real tricky problem to which I'm not sure there are good solutions. There's a mounting conflict of interest upholding the law on the one hand, and the interests of law-abiding citizens on the other.

jmyeet 4y ago

You have to remember that access to the US financial system is a privilege not a right. To be granted that privilege, a financial institution has a number of obligations. Thesee include various KYC/AML obligations. So this isn't Tornado Cash "might be used for illegal purposes" so much as it's clear evidence they're failing to meet their legal obligations. There's a larger point here too: as much as proponents tour crypto's extragovernmental status, it would take very little effort by governments to completely cripple any crypto assset in practical terms.

bruiseralmighty 4y ago
So proposing a hypothetical. If the only issue here is obligation to the U.S. financial system what if the only on-off ramps to e-coins were cash only? So as an individual, I convert my cash to e-coins through some e-coin dedicated ATM-like machine. And I can redeem my e-coins for cash at another e-coin-ATM somewhere else (maybe anywhere in the world). Would coin pools like Tornado Cash then be acceptable? It would not be tied in any way to the credit or banking systems, it takes cash only, and then just a basic utility internet connection. Maintenance for the machines and paying the internet utility would just be a fraction of a percentage fee on each transaction. Now all e-coins would simply exist as a privacy themed alternative ecosystem to cash. Since we are not joining the U.S. financial system, these e-coins should not be expected to have any obligations to that system correct?

0x_rs 4y ago

Criminals are most certainly going to get away with it regardless of how many restrictions and surveillance you apply to the little people, as they have the means (capital) to do so. I don't want to stretch it too far, but the current rules seem nearly purposefully pointed towards the least effort category. There's quite a lot of coverage on this matter, some (and a lot in the cryptocurrency scene) like to cite works from Ronald F Pol who has done a lot of heavy handed criticism on AML et cetera (as far as claiming less than one percent of real-world regulations effectiveness), these claims can be disputed, but it's apparent even to mainstream publications most unlawful flows are uninhibited and the approach is ineffective, expensive and dangerous. https://www.economist.com/finance-and-economics/2021/04/12/the-war-against-money-laundering-is-being-lost https://www.economist.com/finance-and-economics/2021/04/12/t... https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_scandal https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...

croes 4y ago

Are you sure they are lazy or are they just underfunded and with to few personnel?

A4ET8a8uTh0 4y ago
It probably depends. I live in Chicagoland. Cops here are a lot of things, but I can't honestly say they are underfunded. The pension alone is likely worth the risk ( source: couple cops in my extended family ) even if money is not staggering ( and it still not on the low end by any means ). But to go back to the original query. It is just so much more easier to click couple of buttons than go somewhere and ask questions. It is cheaper too. The convenience trumps most of the other reasons. The same goes for privacy. The convenience killed it.

Fnoord 4y ago

If its used for a high percentage of criminal purposes (for example 90%) banning is legitimate. Also, who are these "investors"? They're speculators. When you speculate, there's risk involved. This is one of them. This case is an unnecessary burden on our legal systems, I hope it gets thrown out of court ASAP.

Sir_Liigmaz 4y ago

The USA PATRIOT Act requires every financial institution and money service business have an AML department. There are thousands of people in the US that are paid to look at your bank account and decide if you've been naughty or not and narc to the feds if you have. This is happening everyday. We are already living the surveillance state.

barelysapient 4y ago

At this point, failure to comply with the statute means a violation of law; regardless if any criminal laws were observably broken or not.

davidguetta 4y ago

wait what ? literally the entire point of financial regulations is to avoid it to "possibly be used for illegal purposes". Starting with the very basic KYC regulation, or the fact that in many countries cash transaction above a limit are forbidden. I'm all about privacy and anonymity of transactions personally, but tornado investors going all "surprised pikachu" right now after a more-than-previsible ban is a bit laughable...

jjtheblunt 4y ago

> they are lazy ?

houstonn 4y ago

A question for those in this thread who want to ban a privacy service because it's utilized for unlawful activity: What's your opinion of Tor?