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Tornado Cash (TORN) Suffers 27% Drop As Hackers Strike

Tornado Cash (TORN) has experienced a sudden fall in its market price over the last few hours following news of the DeFi protocol suffering a crypto exploit late yesterday. According to data from CoinMarketCap, Tornado Cash is down 28.25% in the last 24 hours, albeit this only represents a retraced value.

Following news of TORN’s attack, the token initially dropped by over 60% before finding support around the price region of $3.86. Since then, TORN has made some upward movement, however not sufficient to cover up the earlier loss.

TORN Governance System Breached: $2M Stolen

Through a malicious governance proposal, a hacker gained control of Tornado’s Cash Governance, allocating 1,200,000 votes to themselves.

According to Chinese reporter Colin Wu, the hacker used their newly gained control to move a total of 483,000 TORN out of the Tornado Cash governance vault worth about $2 million at the present market price of $4.5.

The hacker then proceeded to deposit 6,000 TORN on the Bitrue exchange and swapped the remaining 379,300 TORN on-chain for 375ETH. Currently, there has been no official statement from Bitrue on this development.

Meanwhile, all TORN investors have been urged to withdraw all their governance-locked funds from the project developers. In addition, the Binance exchange has suspended TORN deposits pending a solution to the governance issue.

 

For now, it remains unknown how long it may take for TORN developers to regain control of the governance system and perhaps recover the stolen loot. Thus, TORN investors are advised to keep a close watch for any latest development. 

At the time of writing, TORN is trading at $4.5, with a 1.5% gain in the last hour. Looking at its broader performance, the DeFi token leaves much to desire, with 30.6% and 48.9% losses in the last 14 and 30 days, respectively.

Tornado Cash

Tornado Cash Becomes Target Of Crypto Hacker

Interestingly, prior to yesterday’s heist, Tornado Cash had played a different role in crypto heists rather than being the target. 

The TORN protocol operates as a decentralized, non-custodial cryptocurrency tumbler that mixes “potentially identifiable or tainted cryptocurrency funds with others” so as to cover the original trail of such funds. 

Due to this service, the DeFi project served as a “money laundering” tool in a couple of crypto heists, most notably the $625 million Ronin exploit in 2022.

About 2000 ETH – valued at nearly $2 million then- of the loot were moved to Tornado Cash following the heist. Following this event, TORN was blacklisted by the U.S. Office of Foreign Assets Control (OFAC), banning all U.S. citizens from engaging with the protocol.

Other popular heists involving the use of Tornado Cash in moving part of the stolen funds include the recent $200 million theft from Euler Finance and the $28 million Derbit hack in 2022. 

 

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Tornado Cash Sees Drop In Activity After U.S. Treasury Sanctions – What Now For TORN?

The value of Tornado Cash is decreasing, not due to market factors but because of recent controversies. The Office of Foreign Assets Control recently added Tornado Cash to its list of Special Designated Nationals. That means no one from the United States may use the token.

By taking this action, OFAC has effectively banned Tornado Cash from participating in one of the most important cryptocurrency markets.

Many owners of Tornado Cash’s native coin, TORN, also liquidated their investments in response to the news. From its high closing of $30.25 on August 7th, TORN has fallen 87.03% to its current price.

Tornado Cash Linked To Nefarious Activities

Even before the OFAC decided to add Tornado Cash to its special list, TORN had been linked to multiple high-value crypto crimes.

The Lazarus Group, perpetrators of one of the largest crypto thefts in history, employed TORN as part of their plot to conceal the true origin of their stolen funds. The breach was carried out on the Ronin Network, an Ethereum-based sidechain.

In March of 2022, the network hosted game Axie Infinity, which saw its highest player count. Because of this, malicious actors like the Lazarus Group were able to zero in on the system and the game with relative ease. The theft led to the loss of 173,600 Ether and 25.5 million USDC.

The total dollar amount is $625,000,000. Later this year, the OFAC will penalize the project and all connected wallets due to this attack.

Chart: TradingView.com
Sanctions Deal A Heavy Blow On TORN

It is hardly surprising that criminal actors have used Tornado Cash to launder stolen cryptocurrency. In the DeFi domain, mixers are special programs that ostensibly enhance privacy by blending transactions, so obscuring the money’s path from point A to point B.

In 2019, more than $7 billion worth of cryptocurrency was laundered using Tornado Cash, according to a U.S. Treasury Department report.

As of this writing, the sanctions have a significant impact on TORN. According to a source, there are currently only 100 unique users on the network.

After the announcement of the sanctions, transactions in excess of $100,000 became practically nonexistent.

TORN is trading just above the 38.20% Fib retracement level at the moment. This level will support the price of the crypto due to the close correlation between the buying and selling quantities of bulls and bears.

As the sanction dismantles the project, it is only a matter of time till it hits zero.

Crypto total market cap at $918 trillion on the daily chart | Source: TradingView.com

Featured image from The Daily Hodl, Chart: TradingView.com