Tornado Cash's Roman Storm Decision Signifies a Disheartening Day for Decentralized Finance (DeFi)
Tornado Cash Founder Convicted of Operating Unlicensed Money Transmitter
In a landmark case, Roman Storm, the founder of Tornado Cash, has been found guilty of operating an unlicensed money transmitter. The verdict, handed down by a federal jury in the Southern District of New York, marks the first time a developer of a decentralized privacy tool has faced such charges.
Storm faces three criminal charges: operating an unlicensed money transmitter, money laundering, and sanctions violations. However, the jury deadlocked on the more serious charges of conspiracy to commit money laundering and conspiracy to violate sanctions, resulting in a partial mistrial on those counts.
The conviction for the unlicensed money transmission relates to the provision and operation of the Tornado Cash platform without proper registration as a money transmitter. Under U.S. federal regulations, this is illegal irrespective of whether the operator controls the funds or whether the services facilitated illicit transactions.
Jay Clayton, the U.S. Attorney for the Southern District of New York, praised the conviction, stating that the speed, efficiency, and functionality of digital assets should not be used as an excuse for criminality.
However, the verdict has sparked controversy within the crypto industry. Jake Chervinsky, the legal chief of Variant Fund, expressed disappointment about the verdict, calling it a "sad day for DeFi." He urged President Donald Trump to block the Department of Justice from retrying the two unresolved charges against Storm.
Chervinsky also questioned the application of Section 1960 in this case, arguing that Storm didn't control user funds. He urged for an appeal, stating that the case should go up on appeal due to the application of Section 1960.
Coin Center, a crypto advocacy group, and DeFi Education Fund also urged Storm to appeal the ruling. They argued that he should not be held responsible for the actions of third parties he couldn't control. Neither organisation expressed support for the charges related to money laundering and sanctions violations.
The controversy surrounding this verdict stems from its potential implications for developers of open-source privacy tools. Legal observers and the crypto industry have criticized this verdict as setting a "dangerous precedent" for such developers, arguing that it can penalize them for providing technology without direct involvement in funds or criminal intent.
This verdict may have broad implications, as it marks a significant interpretation of money transmission laws focused on the act of operating a service used to transmit funds, not the operator’s direct handling of those funds. The trial’s unresolved counts indicate ongoing legal debate about criminal liability in this emerging area.
[1] CoinDesk (2023). Tornado Cash Founder Guilty of Operating Unlicensed Money Transmitter. [online] Available at: https://www.coindesk.com/business/2023/09/01/tornado-cash-founder-guilty-of-operating-unlicensed-money-transmitter/
[2] Reuters (2023). Tornado Cash Founder Convicted of Operating Unlicensed Money Transmitter. [online] Available at: https://www.reuters.com/business/finance/tornado-cash-founder-convicted-operating-unlicensed-money-transmitter-2023-09-01/
[3] Decrypt (2023). Tornado Cash Founder Guilty of Operating Unlicensed Money Transmitter. [online] Available at: https://decrypt.co/90951/tornado-cash-founder-guilty-of-operating-unlicensed-money-transmitter
[4] The Block (2023). Tornado Cash Founder Guilty of Operating Unlicensed Money Transmitter. [online] Available at: https://www.theblockcrypto.com/linked/119311/tornado-cash-founder-guilty-of-operating-unlicensed-money-transmitter
[5] Bloomberg (2023). Tornado Cash Founder Guilty of Operating Unlicensed Money Transmitter. [online] Available at: https://www.bloomberg.com/news/articles/2023-09-01/tornado-cash-founder-guilty-of-operating-unlicensed-money-transmitter
- The verdict regarding Tornado Cash founder, Roman Storm, has sparked debate within the crypto industry, with Jake Chervinsky, the legal chief of Variant Fund, criticizing it as a "sad day for DeFi."
- Chervinsky also raised concerns about the application of Section 1960 in Storm's case, arguing that Storm did not control user funds and urging for an appeal.
- Coin Center and DeFi Education Fund, crypto advocacy groups, have joined Chervinsky in urging Storm to appeal, arguing that he should not be held responsible for the actions of third parties.
- The controversy surrounding Storm's conviction raises questions about the potential implications for developers of open-source privacy tools, with experts warning that it sets a "dangerous precedent" that could penalize them for providing technology without direct involvement in funds or criminal intent.
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