Department of Justice Action Against Tornado Cash Co-Founder
The U.S. Department of Justice (DOJ) announced on Thursday its decision to move forward with legal proceedings against Roman Storm, co-founder of the Ethereum-based coin-mixing platform, Tornado Cash. Storm faces serious charges including conspiracy to commit money laundering and sanctions evasion, as well as knowingly transferring funds obtained through illicit activities, a department representative revealed to Decrypt.
Details of the Charges and Trial
The trial is set to take place in New York City in approximately two months. Federal prosecutors contend that Storm participated in a conspiracy to run an unlicensed money transmitting operation and dodged U.S. sanctions. However, there has been a notable shift in the DOJ’s stance: officials have decided to withdraw one count related to the unlicensed money transmitter charge. Under federal legislation, a business qualifies as an illegal money transmitter if it fails to adhere to U.S. registration requirements.
Industry Reactions
Peter Van Valkenburgh, who leads Coin Center, a non-profit focused on cryptocurrency research and policy, pointed out that this particular charge contradicts guidelines laid out by the Financial Crimes Enforcement Network (FinCEN) back in 2019. These guidelines indicated that non-custodial services such as Tornado Cash do not fall under the definition of money transmitters.
Amanda Tuminelli, from the DeFi Education Fund, insisted that developers of neutral, non-custodial technologies should not face extreme criminal allegations based on misinterpretations of existing laws.
Shifts in DOJ Policy
This announcement regarding Storm comes shortly after the DOJ circulated an internal memo indicating its new direction of not pursuing charges against mixing services broadly, focusing instead on the individuals misusing these platforms for illicit activities. Many within the industry celebrated this memo as a possible positive change in the DOJ’s approach, particularly following the more accommodating stance toward cryptocurrencies during Donald Trump’s presidency. Privacy advocates, including whistleblower Edward Snowden, argue that platforms like Tornado Cash primarily serve as tools for users to protect their privacy on the blockchain.
Case Progression
Storm’s trial preparation follows U.S. District Judge Katherine Polk Failla‘s rejection of his motion to dismiss the case in September, where Storm argued that his work on Tornado Cash was a form of protected speech. Judge Failla ruled that leveraging code to assist alleged money laundering does not receive First Amendment protections.
Changes in Sanction Status
Notably, in March, the Treasury Department removed Tornado Cash from its list of sanctioned entities, overturning restrictions that had been in place since 2022, which barred U.S. citizens from accessing the service. At the time of its sanctioning, the Treasury declared that Tornado Cash had facilitated the laundering of over $7 billion since its inception in 2019. This change in position came after a Fifth Circuit Court of Appeals ruling indicated that the Treasury had exceeded its authority by imposing sanctions on Tornado Cash, suggesting that immutable smart contracts should not be deemed as property under sanction laws.
Related Developments
In a separate development, Alexey Pertsev, another developer associated with Tornado Cash, had been sentenced to over five years in prison for money laundering a year ago, although he was released in February pending an appeal, with an electronic monitoring condition in place. Neither the DOJ nor Storm’s legal team provided immediate responses to inquiries from Decrypt regarding this case.
