Tornado Cash Co-Founder to Face Trial After Motion Denied by U.S. Judge

Highlights:

• Tornado Cash co-founder will face trial after judge rejects his claim that coding is protected free speech.
• Roman Storm could face up to 45 years in prison if convicted on all charges related to Tornado Cash.
• The judge ruled Tornado Cash was not an altruistic venture, citing profit-sharing with venture capital investors.

Tornado Cash co-founder Roman Storm will face trial after a U.S. federal judge rejected his motion to dismiss charges of money laundering, sanctions violations, and operating an unlicensed money-transmitting business. The trial is scheduled to begin on December 2 in New York.

A New York judge has ruled that the criminal case against #Tornado Cash developer Roman Storm will proceed to trial. The U.S. #DOJ accuses Storm and Roman Semenov of conspiracy to launder over $1 billion, with ties to North Korea’s Lazarus Group. Both face up to 45 years in…

— Dehua (@DehuaFi) September 27, 2024

Judge Denies Motion to Dismiss Charges

In a telephone conference on September 26, District Judge Katherine Polk Failla denied Storm’s request to dismiss the charges. She asserted that the government’s allegations were sufficient to proceed. “At this stage, I cannot simply accept Mr. Storm’s narrative that he is being prosecuted merely for writing code,” Judge Failla stated. She emphasized that Tornado Cash was not an altruistic venture but a profit-driven enterprise.

The judge highlighted that Tornado Cash received approximately $900,000 in funding from a venture capital firm, expecting to share in future profits. This undermines the defense’s portrayal of the platform as a neutral, open-source project beyond Storm’s control.

Storm’s defense argued that his actions fell under the protection of the First Amendment, claiming that writing code constitutes free speech. However, Judge Failla ruled that while coding can be expressive, it does not receive protection when used to facilitate illegal activities. She stated, “The functional capability of code is not speech within the meaning of the First Amendment”

She added that the government’s interest in combating money laundering and sanctions evasion is substantial and unrelated to suppressing free expression. Therefore, applying these laws to Storm’s conduct does not burden more speech than necessary.

Potential 45-Year Sentence Looms

Storm, who has pleaded not guilty, faces up to 45 years in prison if convicted on all counts. The charges include conspiracy to commit money laundering, conspiracy to violate the International Emergency Economic Powers Act, and conspiracy to operate an unlicensed money-transmitting business. Prosecutors allege that he knowingly facilitated the laundering of over $1 billion through Tornado Cash. Consequently, this includes funds linked to North Korea’s Lazarus Group.

They claim he profited millions while aware of the platform’s illicit uses. The case underscores the risks developers face when their creations are used for illegal purposes. The fact that a Tornado Cash developer faces trial highlights the increasing scrutiny on cryptocurrency platforms that enable anonymous transactions.

The decision has stirred significant reactions within the crypto community. Jake Chervinsky, chief legal officer at Variant, described the ruling as “an assault on the freedom of software developers everywhere. This will go down in history as a perversion of law and a travesty of justice.” Others express concern that the case sets a troubling precedent for open-source developers.

Judge Failla's ruling denying @rstormsf's motion to dismiss the indictment is an assault on the freedom of software developers everywhere.

This will go down in history as a perversion of law and a travesty of justice.

And it will go down on appeal, if that's what it takes.

— Jake Chervinsky (@jchervinsky) September 26, 2024

Some legal experts argue that holding developers liable for the ways others use their code could stifle innovation. However, prosecutors maintain that Storm was not a passive developer but actively involved and profited from the platform’s illicit activities.

Co-Defendants and Ongoing Legal Battles

Roman Semenov, Storm’s fellow developer, faces indictment on similar charges but remains at large. Another co-founder, Alexey Pertsev, the Dutch court charged of laundering $1.2 billion through Tornado Cash and sentenced him to over five years in prison. He is currently appealing his conviction.

Tornado Cash is an Ethereum-based cryptocurrency mixer that allows users to obfuscate transaction details, enhancing privacy. While it serves legitimate purposes, cybercriminals have also used it to launder stolen assets. The fact that a Tornado Cash developer faces trial reflects the government’s efforts to clamp down on platforms facilitating illicit financial activities.