[jmt_]

He resides in Colorado according to his Linkedin. I don't know a whole lot about crypto - is there anyway he can meaningfully use the donation given the Tornado Cash sanctions? Could just simply being in possession of Tornado Cash Ether give rise to legal problems for him even if he doesn't touch it? Even though it's quite a generous sum amount of money, can't help but wonder if it was sent with ill intentions or if the sender simply lives in a different country and didn't think about the US sanctions

[kube-system]

(edit: If the money is from Tornado Cash), the money is sanctioned, he has to block it from being used anywhere and he must report it within 10 days according to the law (although the treasury realizes that many people receiving this money don't have legal compliance on staff and so they're cutting people slack)

> 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.

[miracle2k]

> No, the money is sanctioned, he has to block it from being used anywhere and he must report it within 10 days according to the law

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.

[kube-system]

> Because he did not receive those funds from Tornado Cash.

Fair, I made the comment under the assumption that the title of this submission was accurate.

[gst]

> the U.S. person must deny all parties access to that virtual currency

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.

[kube-system]

The OFAC is just looking for the money to be blocked. At least, that's what it sounds like:

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.

[toomuchtodo]

I appreciate OFAC being reasonable; it’d be nice if they used Chainalysis to track the digital asset movement and give folks a way to tag their wallet with AML/KYC info for automated compliance purposes. These are public ledgers after all, the reporting does itself for the most part.

Can you send the asset to an OFAC address for seizure and custody to wipe your hands of the issue?

[ram4jesus]

I was thinking if I was receiving this Donation, the amount of stress and anxiety it would cost me in the aggregate would surpass any kind of monetary benefit.

[renewiltord]

No. If he doesn't touch it, he's fine.

Everyone has been dusted by Tornado Cash tainted ETH so it's unlikely they'll go after him.

[A4ET8a8uTh0]

Not sure why you are bring downvoted as it is pretty close to Treasury recent FAQ[1] on dusting:

"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/...

[treis]

$400,000 worth of eth isn't "nominal" though.

[kube-system]

The treasury is using "nominal" to describe what the word "dusting" means... it is when someone sends small amounts of sanctioned crypto to a bunch of accounts. This is from an FAQ article that confirms: yes, even small amounts are in violation of sanction laws.

If a $5 transaction breaks the law, then $400,000 also does.

[A4ET8a8uTh0]

Yeah and that is why I think they may end up having to report it to OFAC anyway and keep submitting annual updates. As always, at this amount, I would consider asking a specialized attorney ( although, ever since Russia invaded Ukraine, they had their hands full ).

[bee_rider]

I think they are being downvoted because "not touching it" is not the end of the required action. It is the first step toward getting in compliance.

The FAQ is saying "don't freak out, here are some forms to fill out to start straightening out this mess" I think.

[chizhik-pyzhik]

It's already been touched, the funds were moved shortly after being received

[jmt_]

If he reports all relevant transactions involving this Ether to OFAC, will he avoid legal repercussions? I noticed a commenter on Twitter brought up the Tornado Cash issue so I wonder if he didn't know before he moved it, because why else would he move sanctioned crypto. Even though OFAC decided to not enforce "nominal" transactions, ~$400k worth of Ether is certainly not nominal so I would guess he needs to cover his ass ASAP.

[colesantiago]

Absolutely not.

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.

[speed_spread]

Could it be staked out so at least money can be derived from the "interests"?

[systemvoltage]

Definitely, IRS is a force to reckon with.