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Overview
The hacker who exploited Kronos Research for $25 million in November 2023 has moved $4 million of Ethereum through Tornado Cash in an attempt to launder the funds.
Exploitation of Kronos Research
The quantitative trading firm Kronos Research was exploited in November 2023 after hackers accessed its compromised API keys. The firm initially denied any loss of funds during its early announcement. However, on-chain investigator ZachXBT later revealed that 12,800 ETH worth $25 million was stolen and transferred to six different cryptocurrency wallet addresses.
Investigation and Laundering
Kronos Capital halted its trading services to investigate the loss, but the funds were never recovered. After six months of dormancy, one of the wallets began transferring funds to Tornado Cash on May 7th. Crypto analytics firm PeckShield raised an alert regarding the transfer, suggesting that the hacker was attempting to launder the stolen funds.
How the Funds Were Laundered
Tornado Cash, an open-source cryptocurrency tumbler, was used to obscure the path of the crypto transactions, making it challenging to trace the original source of the funds. The hacker transferred $4 million worth of Ethereum to a new address via Tornado Cash, rendering the stolen Ethereum untraceable.
Government Backlash
Crypto mixers like Tornado Cash have faced backlash from governments due to their use in laundering illicit assets. Despite their adoption for privacy reasons, these services have been utilized by hackers to legitimize the source of funds and avoid detection by centralized exchanges.
Reports indicate that top multi-million dollar crypto hacks have utilized Tornado Cash for laundering proceeds, leading to sanctions imposed by the US Treasury in August 2022. The founders of Tornado Cash were later charged with money laundering and sanctions violations.
While opinions within the crypto community vary on the use of privacy tools, there is a consensus against persecuting developers solely for creating such applications.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
