On Feb. 21, 2025, around $1.5 billion in ETH was stolen from the Bybit exchange. The Elliptic analytics say the funds were probably stolen by the infamous Lazarus Group. The tokens were likely sent to crypto mixers for laundering. Thieves who stole crypto from Infini the following day were using a mixer service, too. What does the future hold for crypto mixers in the pro-crypto countries?
Crypto mixers were used by thieves after two recent major crypto hacks
According to a report by Elliptic, the Bybit hack is the largest heist of all time, not only the biggest crypto exchange hack. Elliptic points out that usually hacks like the recent Bybit incident involve layering of the stolen funds. It may include the use of decentralized exchanges, swapping services, or crypto mixers like Tornado Cash or Cryptomixer.
In two hours after the hack, 400,000 ETH stolen from Bybit were distributed among around 50 addresses. As of February 23, 10% of these wallets were already emptied. The following actions with these assets may include more transactions like swapping, using the cross-blockchain bridges, mixers, etc. Elliptic singles out the fully anonymous exchange eXch as the main tool for the Bybit hack money laundering at the current stage.
Elliptic analysts say the final stage is obfuscating transactions via crypto mixers. It is noted in the report that this task may be demanding in this case due to the sheer volumes of stolen funds.
Following the Bybit hack, bad actors stole $50 million in USDC from the Infini platform. A crypto mixer Tornado Cash was used at some point to hide the real transaction details. The funds stolen in January’s multi-million hack of the Phemex exchange reportedly ended up in a Tornado Cash mixer as well.
Debate over the legitimacy of crypto mixers
Bitcoin, Ethereum, and many other blockchains keep transaction records transparent. Therefore, if criminals use these blockchains, they may need crypto mixers that obfuscate transaction data and hide from justice.
Although crypto mixers are a handy tool for those committing financial crimes, often, they are not intended to be used only by bad actors. Many people just strive to keep their transactions private. They, too, may see crypto mixers in a positive way.
However, due to the overall frustrating experience, crypto mixers are scrutinized as no matter why people create them, they are often used by criminals. Some crypto mixers don’t stop criminals and serve them for years.
One of the starkest examples is Bitcoin Fog, a mixing service that helped to obfuscate transaction data for 1.2 million bitcoins (around 5% of the total supply) between 2011 and 2021. The platform was used by criminals on many occasions. As a result, Bitcoin Fog creator Roman Sterlingov was sentenced to 12 years in prison after he was found guilty of money laundering conspiracy, money transmission without a license in the District of Columbia, and other crimes.
Three members of the Tornado Cash team were arrested on different occasions in the 2020s, as the mixer platform was allegedly involved in a high-scale money laundering operation associated with Lazarus Group. Tornado Cash developer Alexey Pertsev was freed from prison in February this year, however, his battle continues.
The case sparked the debate over the legal treatment of privacy-focused platforms. The code itself is not a crime. Pertsev wrote an open-source service that obfuscates transaction data on the Ethereum blockchain. He is not an owner of Tornado Cash, nor the one who uses it to launder money.
Some of the people commenting on the case expressed the belief that such situations reveal the urgent need for new laws as often crypto platforms and transactions don’t fit the traditional financial sector frameworks. The situation where a developer who created an open-source platform is facing money laundering charges signals the urgency for more modern regulations. The laws predating the emergence of cryptocurrencies are often too inaccurate to work properly with the new technologies and the people who build them.
Privacy-focused tokens are surrounded by similar debates. For instance, Monero, alongside other popular privacy-focused cryptocurrencies like Dash or Zcash, is delisted from many law-abiding big crypto exchanges in multiple jurisdictions due to their possible use as crime money, with some associating Monero with financing terrorist organizations. We cannot underestimate Monero’s significance as, to some extent, it outperforms Bitcoin on some marketplaces as the crypto of choice.
Will the pro-crypto governments ban crypto mixers?
The future of crypto mixers is hazy. Some privacy-focused coins and crypto mixers are getting banned in certain jurisdictions, including some of the EU countries like France or the Netherlands, the U.S. may see a looser treatment as the government took the pro-crypto and pro-privacy course with Donald Trump publicly disapproving CBDCs.
The sanctions against Tornado Cash were lifted in the U.S. in February which was celebrated as a victory for the crypto community and the community of privacy proponents. It may be a sign that the U.S. will champion the loose regulation of crypto mixers. However, it is too early to judge.
Nevertheless, as recent hackings show, the crypto mixers continue to hurdle the work of the law enforcement fighting cybercriminals. Reportedly, billions worth of crypto stolen by the North Korean hackers were spent on the local nuclear missiles program.
Some developers try to find a perfect balance between providing private transactions and fighting criminals. The Railgun platform supported by Vitalk Buterin in 2024 is an example of a platform trying to adhere to this balanced approach.
However, despite Railgun’s innovative approach, Elliptic reports that this platform was successfully used by Lazarus Group in the past.
Generally, we will see two tendencies in the near future, with the U.S. and countries following its steps, trying to leave crypto mixers as they are, and the rest of the world being especially strict with such platforms.
