Further drama from the Tornado Cash Debacle

Apparently some industrious blockchain explorer specialists have figured out not just how to track all Ethereum leaving Tornado Cash, BUT ALSO also track it as it is sent to other wallets in transactions after the first withdrawal. So right now they can track people 3 transactions away from the Tornado Cash withdrawal, and know their wallet adddresses.
This means means that in addition to projects blocking the wallets of the first person to withdraw Tornado Cash tainted Ethereum. The blockchain explorer specialists can also track this tainted ETH to the second and third transaction after the initial Tornado Cash withdrawal involving this tainted Ethereum from Tornado Cash.
And they are considering blocking and reporting to the US Treasury the addresses of wallets receiving this tainted Ethereum 3 transactions away from the withdrawal.
So the wallet withdrawling the Ethereum would be blocked and reported, but also wallet of, the next two transaction could be blocked and reported.
Crazy Right?!
This tracing process, blocking and reporting of wallet adresses is just tracing the Ethereum on the blockchain explorer.
So the administrators of these centralized defi projects are seriously considering if they should block all these wallets, of people who don't know where their Ethereum is coming from, but they will be treated like criminals anyway.
Since they all contain "tainted' and possibly "stolen" Ethereum.

The critical thing is that this tainted Ethereum starts to spread out exponentially, so the initial withdraw only taints one wallet, but the secondary movement usually taints more then one and sometimes ten wallets, and the third movement of this tainted Ethereum can affect far more, sometimes 100 wallets.
It is impressive that once you get to the third seller, this Ethereum can be distributed to more then 10% of the active Ethereum wallets dealing with certain projects!!
So the project admins are asking themselves, if they really want to block the wallets of 10% of their customers? and report them to the US Treasury?
The main issue for me is that they are not being asked to do this by the Treasury Ban, but they are considering this action out of fear.
They are thinking of doing much more then is required by law.

I assume that they will transition from this moment of crazy insanity.
Can you imagine the impact of blocking the wallets of the second, third, and fourth level transactions away from the Tornado Cash withdrawal?
That could effect first ten wallets, then 100 wallets and then 1000 wallets
And implicating large numbers of people in this regulatory debacle, for no good reason.
This is what happens when the government bans a tool, and then people in charge of heavily used cenmtralized services do more then what the ban is asking them to do.
It is becoming a hot mess.

You may be guilty of possessing stolen Ethereum, and your wallet could be blocked.