An anonymous person donated 299 ETH from Tornado Cash to Redox OS
etherscan.io
etherscan.io
https://news.ycombinator.com/item?id=32923693 - 119 comments
Source: https://etherscan.io/tx/0xca5bb04204f446f73a510ea02b2bd7c01e...
But if their leadership just want to make another piece of software by niche enthusiasts for other niche enthusiasts of some topic then that money is wasted on them.
A good example of where such money has become useful is Signal. Fulltime devs close more issues.
https://twitter.com/jeremy_soller/status/1572350419594268673
If someone hides some valuable assets somewhere on your property and without telling you, presumably the IRS has some less-painful way of resolving this as long as you make a good faith effort to do so as soon as you become aware of it.
> U.S. persons may have received unsolicited and nominal amounts of virtual currency [...] from Tornado Cash, [...] Technically, OFAC’s regulations would apply to these transactions.
> Once a U.S. person determines that they hold virtual currency that is required to be blocked pursuant to OFAC's regulations, the U.S. person must deny all parties access to that virtual currency, ensure that they comply with OFAC regulations related to the holding and reporting of blocked assets, and implement controls that align with a risk-based approach.
> 31 C.F.R. Parts §§501.603 and 501.604 require blocking and reject reports to be submitted to OFAC within 10 business days
> A report of blocked property is to be submitted annually by September 30
https://home.treasury.gov/policy-issues/financial-sanctions/...
The only thing that was donated here is a legal compliance headache that will continue for years to come.
This is not correct.
> U.S. persons may have received unsolicited and nominal amounts of virtual currency [...] from Tornado Cash
Because he did not receive those funds from Tornado Cash. He received them from a third party. This third party has interacted with a sanctioned entity (Tornado Cash), but sanctions are not transitive.
You can test this easily w/o cryptocurrency: You may not be allowed to transact with Iran, but you can buy stuff from a Germany company which has business with Iran - until OFAC may want to decide to sanction the Germany company.
The "dusting attacks" the OFAC FAQ refers to are transactions that someone sends directly from the TC smart contract to your wallet.
Fair, I made the comment under the assumption that the title of this submission was accurate.
With Bitcoin that would be relatively straightforward: Just ignore the UTXO because the incoming funds are clearly separated from any preexisting funds.
But with Ethereum that's different due to the account-based approach: What's the impact if those funds are intermingled with preexisting funds on the same Ethereum address? Is it now unsafe to spend any of those funds or can existing funds be spent as long as the minimum balance doesn't fall below the amount of sanctioned funds?
Also what's the impact in terms of taxes: Could there be a situation where Redox OS needs to pay taxes on those 299 Ether but at the same time is not able to disburse them? Due to the high crypto volatility this could become a headache quickly: Imagine having to pay taxes for this year, but then due to the sanction only being able to actually sell those Ether in a later year when the price could be potentially a lot less than the tax liability.
https://home.treasury.gov/policy-issues/financial-sanctions/...
I don't think that sanctioned money is income, but these are all good questions that I'd be asking my lawyer/IRS/treasury if I got a donation like this.
Can you send the asset to an OFAC address for seizure and custody to wipe your hands of the issue?
Everyone has been dusted by Tornado Cash tainted ETH so it's unlikely they'll go after him.
"OFAC is aware of reports following the designation of Tornado Cash that certain U.S. persons may have received unsolicited and nominal amounts of virtual currency or other virtual assets from Tornado Cash, a practice commonly referred to as “dusting.” Technically, OFAC’s regulations would apply to these transactions. To the extent, however, these “dusting” transactions have no other sanctions nexus besides Tornado Cash, OFAC will not prioritize enforcement against the delayed receipt of initial blocking reports and subsequent annual reports of blocked property from such U.S. persons.
For guidance related to filing an initial and annual report of blocked property, please see FAQs 49, 50, and 646, respectively, and 31 C.F.R. § 501.603. Please note that the annual filing requirement for 2022 applies only to persons holding blocked property as of June 30 of this year. Released on 09/13/2022 "
The individuals that got ETH may have some reporting requirements, but OFAC seems to understand it is an effort to make enforcement complicated by design.
[1]https://home.treasury.gov/policy-issues/financial-sanctions/...
If a $5 transaction breaks the law, then $400,000 also does.
The FAQ is saying "don't freak out, here are some forms to fill out to start straightening out this mess" I think.
Once he touches this laundered ETH, he’ll face a whole host of legal issues.
I’m assuming that the IRS and all the other relevant authorities already know about this and are ready to pounce on Redox once they touch that Tornado ETH.
It is worth just sending that tainted ETH to a dead wallet to avoid all that trouble.
If I was a charity and got a suitcase full of dirty cash, I wouldn't necessarily be upset if I had to jump through hoops to make use of it.
I think in this case, FOSS would stand to gain more by not receiving money-laundered transactions which, as someone else pointed out in this discussion, would create a compliance nightmare.
To put it this way: would you accept 1,000 dollars from me if it would take you 100 hours of your life to receive?
Keep in mind that there is, as of right now, no evidence that this cash was "laundered" or in any way associated with any nefarious activity. It's merely anonymous.
What exactly makes an open source project so special that it should be exempt from the regulations that apply to everyone else?
And if that were the case, what would prevent an open source project from being just a smokescreen for something else? Obscure API implementations paying pseudonymous developers for PRs with anonymous donation money seems like a fine kind of laundering operation.
If that happens then you investigate, find out if it is a money laundering scheme, and bring a criminal prosecution if it is. You don't just assume they're guilty because the transaction was anonymous, or ban privacy tools and conduct mass surveillance on every transaction to make sure none of them are suspicious.
It's kinda wild how many people on HN suddenly become anti decentralization and pro mass surveillance whenever the topic of cryptocurrency comes up.
This makes it sound like this happened in a vacuum, but those laws and regulations are in response to real world events and you have to consider that when talking about whether laws are unreasonable. For example, many people would have ethical objections to accepting a donation from an unknown source (what if the money was generated from some activity I object to?), don't want to deal with potential hassle if the source does something to trigger legal attention, or the risk of a non-zero chance of some unsavory sorts showing up and “suggesting” that you give them some fraction of it as clean cash, etc.
Allowing anonymous transactions means that the latter two kinds of events will happen on an somewhat regular basis, which is why most people accept laws requiring financial institutions to know their customers' identities as a necessary cost. If you say magic internet money is exempted from those requirements, well, there are going to be a whole bunch of surprisingly well-funded open source projects in Mexico paying salaries which make FAANG employees weep with envy.
> To put it this way: would you accept 1,000 dollars from me if it would take you 100 hours of your life to receive?
Does that really apply here? If this money can't be touched, then it's a minor time sink with zero benefit.
If there is a way to dump in 100 hours and extract the money, it's worth it because it's so much.
That analogy is more fitting to a 1 ETH donation.
Fixed the amount for you. Yes, absolutely. I would spend 100 hours to receive the 350,000. That's 3500 per hour.
Assuming the money would be ethical and cleared by the government (two separate things), I too would absolutely take it. :P
Tornado Cash wasn't some haven for big money philanthropy pre-sanctions.
> Tornado Cash wasn't some haven for big money philanthropy pre-sanctions.
Vitalik used it to donate to Ukraine [0], and there are several other examples here [1] as well.
[0] https://forkast.news/vitalik-buterin-says-used-tornado-cash-...
[1] https://www.bloomberg.com/news/articles/2022-09-08/coinbase-...
Nobody was sending a half-million dollars to FOSS projects with it pre-sanctions.
[]
We can, however, consider your sources of people who did speak out -- none of them are philanthropists who contributed to large sums to FOSS projects. They were ETH enthusiasts who spoke up to make a point. The probably made some incidental donations to causes they supported, as a matter of being ETH enthusiasts.Philanthropists use fiat, de facto. Anything else is notable.
> Tornado Cash wasn't some haven for big money philanthropy pre-sanctions.
Citation needed.
Funny enough, even VB himself has 'Tainted' Eth in his wallet. He's used tornado cash on three different occassions.
No, the intent of the donation is to cause trouble to FOSS projects and waste their time. Not sure why you're appreciating this. It's like donating stolen property to the local orphanage.
Well, this is what it actually means: you’re on the hook for enforcing sanctions and all kinds of shit that banks do.
Of course. Making it impractical through enforcement of laws will benefit governments efforts to crush crypto, no?
>Would expect
Only if you believed government wanted crypto to succeed, yes?
what someone on twitter wrote is pretty apt:
deposit the Ether in AAVE to borrow USDC, move the USDC to another address and send that to Coinbase to cash out
pretty much just walk away from the deposited Ether, let that get collateral called eventually. The protocol can enjoy its sanctioned money.
https://twitter.com/jeremy_soller/status/1573386439941029888
If Coinbase seizes the money, that's fine. If they let him keep it, then there's no better way to cash out than through Coinbase. It's going to generate an automatic love letter to the IRS with all the details of the transactions, and he'll be taxed appropriately.
from what I can tell, even if you got a license or reported to the Treasury, crypto exchanges and crypto services will auto-block you anyway and aren't prepared for exceptions and edge cases.
a great lawyer knows the judge
Copyrighted material on blockchain has been discussed many times, it is just not viable attack because blockchain space is crazy expensive. There has been various data uploaded to the blockchain but you also need scripts to extract that data, so it also raises the question if that is even that accessible data.
Validators aren't just storing the information. They're actively processing transactions and getting paid to do it.
> Copyrighted material on blockchain has been discussed many times, it is just not viable attack because blockchain space is crazy expensive.
That's not a very satisfying conclusion to the topic
That’s expensive, but not impossible for a stunt.
There is no such thing as "tainted" ETH. The ETH was transferred from address 0x4B6275DB08c61aeFBa7bADaaE93aa853e377CddB which is not a sanctioned address[0]. It is therefore fine to receive and spend that ETH.
It is possible that the donator violated US sanctions by taking it out of the Tornado Cash smart contract if: 1) they are a US person/under US jurisdiction 2) they are the same person that withdrew them from the Tornado Cash contract (not necessarily true).
Additionally, businesses which are not "money transmitters" (e.g. banks, crypto exchanges, etc.) are not subject to KYC regulations and are under no legal obligation to know the identity of their customers or donators.
Finally, I'd like to add that privacy-enhancing smart contracts like Tornado Cash have legitimate uses and were used for legitimate reasons, notably by Ethereum cofounder Vitalik Buterin who probably didn't like everyone observing and commenting on his Ethereum spending habits. I've seen a lot of "crypto critics" simultaneously criticize the transparency of blockchains and smart contracts like Tornado Cash which fix the problem...
[0] https://home.treasury.gov/policy-issues/financial-sanctions/...
In such a scenario we try to enforce so KYC so much that we competely disregard the good that lack of KYC could do for us. What if this is drug money being used for actual good things? In some ways you couod say that the system is working: sometimes ignoring the law brings good to the society.
I am bringing here the same argument that would be used towards never prosecuting people for crimes that were discovered when someone has already reported a crime: i.e. if someone submits a DNA sample due to being raped can not be prosecuted for petty crime that was discovered due to it as that would make people in that situation do even more crime.
For me that drastically increases the "potentially shady" factor.
Moneyed effort on a Linux replacement for the long term purpose of locking something back down.