L2BEAT researchers flagged a governance proposal submitted to the Tornado Cash DAO that points to an unverified contract. The L2BEAT team called it "very unusual" and "a clear indication that the proposal should be treated as malicious." The proposer's address was funded by Railgun, a competing privacy protocol, just four days before submission.

Sergey Shemyakov, a ZK researcher, posted on X asking others to review the proposal, which he said "shows pretty convoluted logic." On the surface, the proposal claims to define a new fee structure and "establish a brand-new dynamic deflationary economic model."

Pascal Caversaccio, a researcher at Security Alliance, alleged the real intent is a bait-and-switch: replace the current DAO governance address, which holds $23 million of TORN tokens, with an attacker-controlled address that shares the same initial 15 characters. A similar swap would target the staking governance proxy contract. Caversaccio warned that the spoofed governance address would gain power to "zero out any relayer's balance at will." He urged TORN holders to reject it.

A pattern of attack

Tornado Cash has faced governance chaos before. In May 2023, a malicious proposal passed that granted an attacker 1.2 million votes, exceeding the roughly 700,000 legitimate votes in circulation. The attacker then zeroed their voting power to cover tracks, but not before washing around $800,000 in stolen TORN through the service itself.

Later that year, multiple Tornado Cash IPFS front ends were infected with malicious JavaScript designed to leak deposit data to an attacker-controlled server. Even a thief fell victim to the compromise.

Legal crosswinds

The DAO's governance troubles arrive amid ongoing legal peril. The US Treasury sanctioned Tornado Cash in 2022, a ban that was reversed last year. Developer Roman Storm faced prosecution for conspiracy to operate an unlicensed money-transmitting business. His trial ended with deadlocked jury votes on two counts. Prosecutors have pushed to retry those charges. Storm's case remains unresolved.