Tornado Cash Faces Increased Scrutiny as New York Judge Clears Path for Roman Storm’s Criminal Trial

• Roman Storm’s trial for Tornado Cash-related money laundering will begin on December 2 in New York.
• A federal judge rejected Storm’s defense that Tornado Cash development was protected by the First Amendment.
• Hackers recently laundered $27M and $6.5M in Ethereum through Tornado Cash, intensifying scrutiny of the crypto protocol.

A U.S. federal judge has denied Tornado cash Roman Storm’s request to dismiss charges of money laundering and sanctions evasion. This decision allows Storm’s trial to proceed on December 2 in New York. The U.S. Department of Justice accuses Storm of laundering over $1 billion. Additionally, they allege he has ties to North Korea’s Lazarus Group.

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

Tornado Developer First Amendment Defense Rejected

Storm’s legal team argued that creating Tornado Cash was an act of free speech under the First Amendment. However, Judge Katherine Failla disagreed. She explained that while computer code can be expressive, using it to perform specific functions is not protected speech. Consequently, the ruling supports the government’s view that code involved in criminal activities is not covered by free speech rights.

Tornado Cash’s Role in Cybercrime

Tornado has become prominent for its capability of concealing transaction flows. Although some users value its privacy features, U.S. authorities claim that hackers, especially those from North Korea, have used it as a tool. 

The DOJ claims that the protocol enabled these groups to launder stolen cryptocurrency. Recently, a hacker laundered $27 million in stolen Ethereum through Tornado Cash, despite a bounty being offered for its recovery. This incident adds to the growing list of concerns surrounding the platform’s misuse.

Legal Arguments and Industry Response

Storm’s defense team also argued that Tornado Cash is an immutable protocol that he does not control. However, Judge Failla dismissed this claim, stating that control is not required for operating an unlicensed money transmitting business. 

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She also emphasized that Tornado Cash is not fundamentally different from other crypto mixers previously recognized as money transmitting businesses in legal cases. Adding to these concerns, another hacker recently moved $6.5 million in Ethereum to Tornado Cash, sparking fears about the continued use of the service for laundering illicit funds.

The ruling has sparked concern among legal experts in the crypto industry. Amanda Tuminelli, the chief legal officer at the DeFi Education Fund, expressed disappointment, noting that they had hoped the court would reject the government’s interpretation of developer liability. Jake Chervinsky, chief legal officer at Variant, warned that the decision threatens the freedom of software developers.

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