Syed Rahman considers the case so far.
Tornado Cash co-founder Roman Storm is set to face trial on money laundering charges.
The US Department of Justice (DOJ brought charges against the founder of the Ethereum-based crypto mixer, alleging that more than $1 billion had been laundered. A US district judge has denied a motion to dismiss the lawsuit.
The DOJ has brought three money laundering charges against Storm, each of which carries a maximum prison term of 20 years. He also faces a conspiracy charge.
In his attempt to have the charges dropped, Storm’s lawyers argued that his involvement with the crypto mixer - and the funds laundered through it - is limited to the development of the software. This, they argued, was protected by the freedoms granted under the US First Amendment.
But the judge denied Storm’s motion to dismiss the criminal charges, saying his argument was not sufficient to overcome the DoJ’s complaint. The judge stated that the government brought plausible allegations against the Tornado Cash developer and the functional capability of code does not qualify as free speech protected by the First Amendment.
Significance
This case could have considerable significance from a UK viewpoint. It underscores an emerging trend where developers of privacy-focused crypto tools, like mixers, face personal liability for how their technology is used. The UK, following measures in the Economic Crime (Transparency and Enforcement) Act 2022, has ramped up anti-money laundering (AML) enforcement. This includes looking more closely at how financial technologies - especially those that facilitate anonymity - are deployed.
If Storm is convicted in the US, it could bolster efforts by UK authorities to investigate crypto developers - emphasising that software enabling anonymity can, under certain circumstances, face scrutiny under AML laws.
Under UK law, intent and knowledge are crucial in establishing liability. Storm could argue that he neither intended nor knew that Tornado Cash would be used predominantly for illicit purposes. By showing that the software was designed for legitimate privacy protection - for example, for those users that value transaction privacy for legal reasons - he could potentially weaken the claim that his development efforts equate to enabling money laundering.
There may well be an argument that, like many decentralised applications, Tornado Cash operates independently of its developers once launched. As such, how much control he had will be key here.
