Decentralized protocol Aave has blocked one of the wallet addresses of the founder and CEO of the Tron project, Justin Sun, after he unknowingly interacted with the sanctioned cryptocurrency mixer Tornado Cash. The Tron founder said Aave has banned one of his wallet addresses after he received Ethereum dust randomly from Tornado Cash.
Recall that the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently imposed sanctions on Tornado Cash because they helped criminal minds to launder proceeds of crime, including those crimes committed against victims resident in the United States of America. The sanctions came after the Ethereum-based cryptocurrency mixer became a laundering haven for hackers who have drained at least $1.4 Billion from cryptocurrency bridges between January and now.
Shortly after the sanctions, a Tornado Cash user sent 0.1 ETH from a blacklisted Tornado Cash contract address to big crypto companies, celebrities, popular crypto figures and random traders. This was apparently done to mock the US Treasury. According to Peckshield (a blockchain security firm), more than 600 addresses received 0.1 ETH from Tornado Cash including Beeple, Coinbase’s Brian Armstrong, Justin Sun, sifu.eth, Binance, FTX and Ukraine crypto donation.
The Aave team responded in a Twitter thread that they recently integrated TRM’s API to the platform’s IPFS front-end, which is why some customers had issues logging into the Aave app. According to Aave, the integration helps to identify wallets that interacted with Tornado Cash contracts after the sanctions were imposed. However, the API made some incorrect calls and blocked wallets that received ETH from Tornado Cash contracts without consent. The Aave team said the issue had been resolved, and Justin Sun had regained access to his account.
Surprisingly, at least five decentralized protocols have blocked those who randomly received the 0.1 ETH from the blacklisted wallet along with those who have had previous exposure to Tornado Cash, causing crypto users to question the concept of decentralization in cryptocurrency. The ban could also cause liquidation problems if crypto prices fall. This is because blocked DeFi users with active loans won’t be able to access their accounts in order to add liquidity and manage their Loan-to-value (LTV) to avoid forced liquidation.
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