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  • L Higgins and S Pettigrove

Motions fly as Tornado Cash case twists and turns

The United States Department of Justice (DOJ) is standing firm following a defence motion to dismiss charges against Roman Storm, one of the co-founders of Tornado Cash. In its 111-page response filed in the District Court of New York, the DOJ contends that crucial facts in the case are in dispute and should be left for a jury to decide.

Storm and fellow developer Roman Semenov are accused of conspiring to commit money laundering, running an unlicensed money transmitting business, and breaching sanctions laws in connection with their role in developing the Tornado Cash platform. US authorities allege that groups like North Korea's Lazarus Group exploited Tornado Cash for money laundering activities.

Storm pleaded not guilty to all charges in September 2023 and was released on a $2 million bond shortly after his arrest. In late March 2024, Storm's legal team moved to dismiss the indictment. Semenov also argues that he contributed to the code design of the protocol, but isn't responsible for its usage.

The defence argues that Tornado Cash doesn't meet the criteria of a "financial institution” which would be required to apply anti-money laundering measures. The defence also alleges that Storm lacked control over the service to prevent its misuse after immutable smart contracts were deployed on the Ethereum blockchain.

The prosecution countered that Storm played a pivotal role in operating the cryptocurrency mixer, facilitating criminal anonymity. They criticised the co-founders for failing to implement adequate Know Your Customer and sanctions screening measures to block sanctioned addresses.

The legal standoff unfolds amidst the US government's intensified crackdown on crypto-mixing services.

Last week, the founders of Samourai Wallet, Keonne Rodriguez and William Hill, were arrested and charged with conspiracy to commit money laundering and operating an unlicensed money transmitting business. These charges carry significant penalties, with a maximum sentence of 20 years for money laundering conspiracy and five years for operating an unlicensed money transmitting business.

The DOJ's enforcement action against Tornado Cash has seen mixed reactions from blockchain enthusiasts and industry professionals alike. Amanda Tuminelli, Chief Legal Officer at the DeFi Education Fund, was critical of the DOJ's "misapplication of the law" in her thread on X which she said would "ruin [the] weekend" of those who read the full DOJ document:

The legal battle will likely have broader ramifications for software developers as the Government seeks to make the Tornado Cash founders liable for the acts of third parties who exploited the autonomous smart contracts underpinning the protocol. The forthcoming trial will likely define the boundaries of legitimate software development activities and developers' liability where that software facilitates illicit funds flows.

By Steven Pettigrove and Luke Higgins


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