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Tornado Cash

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Tornado

The crypto community has rallied behind the developers of former crypto mixing service Tornado Cash, who have been charged with money laundering, sanctions violations and operating an unlicensed money-transmitting business — with one already having been convicted and sentenced to jail.
Following the arrests of Tornado Cash co-founder Roman Storm and developer Alexey Pertsev, the crypto community came together to establish JusticeDAO, an advocacy group that aims to raise money for the arrested individuals’ legal defense.
The group has raised over 654 Ether (<a href="https://cointelegraph.com/ethereum-price" rel="noopener noreferrer nofollow">ETH</a>), worth $2.3 million at publishing time, through a fundraiser called “Free Alexey &amp; Roman” on the decentralized platform Juicebox. The fund also raised 70 ETH via the JusticeDAO page.
<figure data-ct-non-breakable="true"><img src="https://s3.cointelegraph.com/uploads/2024-06/d7665b03-b123-4704-b99d-282ad2e34786.png">
 <figcaption style="text-align: center;">Alexey Pertsev and Roman Storm legal defense fund. Source: <a href="https://juicebox.money/@free-pertsev-and-storm" target="_blank" rel="noopener noreferrer nofollow">Juicebox</a>
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Juicebox <a href="https://docs.google.com/spreadsheets/d/1P69NhyLshI6kwfo7KqaA_rNUV5vpRw9JTJOfFAsdqAk/edit#gid=0" target="_blank" rel="noopener noreferrer nofollow">released </a>a publicly available spreadsheet tracking the expenses of the Free Alexey &amp; Roman fund. According to the data, the fund spent $1.39 million in legal fees between December 2023 and May 2024. The fund expects to spend another $2.8 million in the next five months and an additional $400,000 in expert research and additional legal fees, with the total fees for 2024 anticipated to reach nearly $3.35 million in 2024.
The fund <a href="https://cointelegraph.com/news/vitalik-buterin-30-eth-tornado-cash-legal-defense" rel="noopener noreferrer nofollow">includes significant contributions</a> from Ethereum co-founder Vitalik Buterin, himself a privacy advocate who has published numerous papers and suggestions on enhancing privacy on Ethereum.
Advocates within the crypto community claim that creating the means to protect financial privacy — e.g., through a crypto mixer — is not a crime. However, regulators disagree.
Despite the help from the crypto community, the founders of Tornado Cash face serious charges.
<h2 data-ct-non-breakable="true" id="tornado-cash-founder-appeals-to-dismiss">Tornado Cash founder appeals to dismiss</h2>
In 2022, The United States Treasury Department <a href="https://home.treasury.gov/news/press-releases/jy0916" target="_blank" rel="noopener noreferrer nofollow">alleged </a>that notorious criminals used Tornado Cash to launder more than $7 billion in crypto assets for nearly three years.
A year later, in August 2023, the platform’s co-founders, Storm and Roman Semenov, were accused of money laundering and sanctions violations. Storm was <a href="https://cointelegraph.com/news/tornado-cash-co-founders-charged-with-money-laundering-sanctions-violations-ofac" rel="noopener noreferrer nofollow">arrested by the U.S. Federal Bureau of Investigation</a> that same month, while Semenov was put on the Treasury’s Office of Foreign Assets Control sanction list.
Storm is facing three charges: conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business and conspiracy to violate the International Emergency Economic Powers Act. He has pleaded not guilty to all the charges.
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Storm’s legal counsel <a href="https://cointelegraph.com/news/tornado-cash-roman-storm-dismiss-charges-money-laundering" rel="noopener noreferrer nofollow">appealed to dismiss the money laundering charges</a>, arguing that they are “fatally flawed” and must be dismissed, given that Storm can’t control or prevent sanctioned entities from using the crypto mixer.
Storm’s lawyers argued that Tornado Cash was developed and publicly available before sanctioned hackers had the opportunity to use it.
In May 2024, a Dutch court found Tornado Cash developer Pertsev guilty of money laundering and <a href="https://cointelegraph.com/news/tornado-cash-developer-guilty" rel="noopener noreferrer nofollow">sentenced him to five years and four months in prison</a> for allegedly laundering $1.2 billion worth of illicit assets on the platform.
<h2 data-ct-non-breakable="true" id="developers-should-be-wary-about-end-use">Developers should be wary about end-use</h2>
The case has raised questions about how coders are held legally responsible for the end-use of the tools they create.
Josh Garcia, a partner at Ketsal — a law firm focused on fintech, Web3 and consumer financial services — believes that while it is wise to make developers think about the consequences of their code, it is burdensome for a small group of developers to chart out all foreseeable criminal uses of their software.
Gracia told Cointelegraph that the Dutch court’s decision would force developers in the Netherlands to stay anonymous or pseudonymous rather than risk criminal liability for building software.
“Some developers may even quit entirely out of fear the U.S. will take the same approach. For developers who are doxed and want to continue development efforts, the Dutch approach might force them to go underground,” he added.
Garcia believes the consequences of the Dutch approach may extend beyond blockchain. He questioned whether the CEO of a 3D printer manufacturer should worry about criminal liability if one of its users prints a firearm in a jurisdiction where guns are prohibited.
“If the Dutch sentiment carries over to the U.S., and free speech advocates cannot argue code is protected speech under our First Amendment, many developers will go underground, not just in blockchain but in any field with a potential threat of criminal liability. This will be a massive step backward for the blockchain community at large,” he said.
Rebecca Liao, co-founder and CEO of Web3 developer platform Saga and a Harvard Law School graduate, believes the case isn’t merely about writing code.
She told Cointelegraph that the U.S. legal system requires more than just the “act of writing code” to constitute a criminal offense — it necessitates that individuals demonstrate criminal intent.
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“In the case of Tornado Cash, the prosecution aimed to prove that the developers knowingly facilitated illegal activities, and the court ultimately agreed with this argument. These court actions indicate, in general, that developers must be vigilant about the potential misuse of their creations and implement safeguards to prevent legal repercussions, and the organizations they work for have to put processes in place to support them,” she explained.
Storm’s upcoming trial will be a pivotal case for the crypto industry, especially for privacy-focused services. The Dutch court’s prosecution of Pertsev has already sent ripples through the crypto developer community, and legal experts predict it will put unprecedented pressure on developers who work on similar projects in the near future.
Jamie Wright, founder of the Wright Law Firm, told Cointelegraph that historically, cases involving tech and criminal intent often result in severe penalties because of the “perceived threat these technologies pose to financial and regulatory systems.” He noted that in the case of Tornado Cash, the future will largely hinge on whether the courts see the actions as “neutral technological advancement or as knowingly enabling illegal activities.”

Crypto community backs Tornado Cash devs with $2.3M legal fund

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