Crypto Exchange dYdX Blocked Accounts That Received Even Small Amounts From Tornado Cash

Many users were locked out even though they had no idea they had received funds from the crypto mixer.

AccessTimeIconAug 11, 2022 at 9:37 a.m. UTC
Updated May 11, 2023 at 4:23 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Cryptocurrency exchange dYdX said it blocked user accounts with even a token link to Tornado Cash, the crypto-mixing service sanctioned Monday by the U.S. Treasury Department.

The Treasury Department's action led to a significant increase in accounts flagged by dYdX's compliance provider, which is used to highlight accounts potentially associated with ransomware, malware, child sex abuse material, known criminals and sanctions lists, the company said in a blog post.

  • Some Pro-Russian Groups Using Crypto to Fund Paramilitary Operations: TRM Labs
    01:39
    Some Pro-Russian Groups Using Crypto to Fund Paramilitary Operations: TRM Labs
  • Binance’s Bid to Buy Voyager’s Assets Complicated by National Security Concern: Sources
    01:28
    Binance’s Bid to Buy Voyager’s Assets Complicated by National Security Concern: Sources
  • US Treasury Sued for Sanctioning Crypto Mixer Tornado Cash
    07:12
    US Treasury Sued for Sanctioning Crypto Mixer Tornado Cash
  • Ethereum Mining Pool Cuts All Services to Russia
    04:50
    Ethereum Mining Pool Cuts All Services to Russia
  • The dYdX accounts were subsequently blocked even though the owners may never have directly engaged with Tornado Cash. Users do not necessarily know the origin of the funds transferred to them, the exchange said.

    "Many accounts were blocked because a certain position of the wallet's funds (in many cases, even immaterial amounts) were associated at some time with Tornado Cash," dYdX said.

    According the Treasury Department, Tornado Cash was used by the Lazarus Group, a North Korean hacking group it tied to the $625 million hack of Axie Infinity's Ronin Network in March. Tens of millions of dollars have flowed through the mixer, which was designed to obscure the origin of funds.

    DYdX asked users who think their accounts have been wrongly blocked to contact its compliance team.

    CoinDesk has requested further comment from dYdX.

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Jamie Crawley

    Jamie Crawley is a CoinDesk news reporter based in London.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.