Kronos Research, a quantitative trading firm, fell victim to a hacker in November 2023, resulting in a loss of $25 million. Initially, the company denied any funds being stolen, but later it was revealed that 12,800 ETH worth $25 million was indeed taken. The stolen funds were transferred to six different cryptocurrency wallet addresses.
In an attempt to launder the stolen money, the hacker moved $4 million of Ethereum through Tornado Cash, a cryptocurrency tumbler or “crypto mixer.” Tornado Cash is designed to obscure the origin of funds, making it difficult to trace them back to their original source. Hackers often use such mixing services to launder stolen funds, taking advantage of the privacy they provide.
The process involved transferring 200 ETH to Tornado Cash from the wallet, followed by an additional transfer of 1,314 ETH worth $4 million to a new address. From this new wallet, the hacker made ten transactions of 100 ETH each to Tornado Cash, effectively making the stolen Ethereum untraceable.
Crypto mixers like Tornado Cash have gained popularity in recent years, with over $77 million in assets being processed through the platform in October 2023. However, most of this adoption has been for illicit purposes. Hackers prefer using crypto mixers over centralized exchanges because once an address is identified as being involved in illicit activities, it is often blocked by exchanges. By using Tornado Cash, hackers can legitimize their stolen funds and remove any connections to hacked wallets or illicit crypto activities.
The use of crypto mixers has raised concerns among governments, and the US Treasury imposed sanctions on Tornado Cash in August 2022. The founders of the platform were later charged with money laundering and sanctions violations. Despite this, there is a consensus within the crypto community against persecuting developers solely for creating privacy tools.
The case of Kronos Research highlights the ongoing challenges in combating cybercrime and the need for stronger security measures in the cryptocurrency industry.
