The cryptocurrency derivatives trading platform dYdX said that it incorrectly suspended some users who had never directly interacted with the controversial mixer and barred some users’ accounts with funds connected to Tornado Cash.
Even though some accounts had never dealt with the cryptocurrency mixer, according to dYdX, its compliance provider reported numerous Tornado Cash accounts were immediately blocked by the platform.
dYdX rectifies Tornado Cash ban error
In a blog post on Wednesday, dYdX stated it has “unbanned certain accounts” that the derivatives platform had restricted in response to the US Treasury Department’s Office of Foreign Assets Control adding the mixer in the Specially Designated Nationals list, or SDNs.
According to the platform, it has utilized compliance vendors to search for and flag accounts that may be involved with illegal activities, including sanctions lists for several nations.
“This sudden influx of flags affected many account holders that never directly engaged with Tornado Cash, and often such users do not realize the origin of the funds transferred to them during various transactions prior to interacting with our platform, but we must nevertheless maintain certain restrictions,” dYdX said.
Banning the users, it explained, did not equate to seizing funds because withdrawals would always be possible, according to dYdX. The platform, however, can put accounts in “close-only mode.”
Community reactions
Lia Holland of the tech advocacy group Fight for the Future described the Treasury’s use of sanctions against bad actors like the North Korean hacking group Lazarus.
Some critics of the Treasury’s move to include the mixer on its list of SDNs contend that it is a “neutral tool” that anybody can use rather than a platform with ulterior motives.
Tornado co-founder Roman Semenov said that his account on the developer portal GitHub has been suspended. Platforms Alchemy and Infura.io limited remote procedure call requests to the mixer on August 9.
Following the Treasury’s addition of the controversial mixer to its sanctions list on Aug. 8, many crypto trading platforms have restricted access to the virtual currency mixer. As a SDN, “US persons are generally prohibited from dealing with them,” and assets of organizations and individuals listed are blocked, including 44 USD Coin (USDC) and Ether (ETH) addresses linked to the mixer.
Circle, a stablecoin issuer, suspended funds worth a total of 75,000 USDC at addresses listed by Treasury officials after the announcement of the sanctions. However, actions against people connected to the cryptocurrency mixer go beyond centralized exchanges in the US.