Mistrial in Tornado Cash developer Roman Storm's money laundering trial

Business Insider

17 hours ago

Prosecutors say Tornado Cash was the preferred money-laundering tool for the world's gutsiest scammers and hackers who used the software to "clean" at least $450 million in stolen cryptocurrency.
But on Wednesday, a federal jury in Manhattan was disbanded after it could not agree on whether Roman Storm, 36, the co-developer of Tornado Cash, was a money launderer.
The three-and-a-half week trial ended with a partial mistrial after the jury said they could not agree on the two most serious charges: money laundering and violating international sanctions, each carrying potential sentences of 20 years in prison.
He was found guilty only of conspiring to operate an unlicensed money-transmitting business and faces a potential maximum sentence of five years in prison.
He was not taken into custody Wednesday despite prosecutors complaining he is a flight risk due to his ties to his native Russia and access to an estimated $16 million in ETH. Prosecutors did not immediately say if they would seek a retrial on the two hung counts, and a sentencing has not been set.
"I think Mr. Storm has every intention to stay here and fight" the one count he was convicted on, US District Judge Katherine Polk Failla said in allowing Storm to remain free on $2 million bail.
Prosecutors had called Tornado Cash "a giant washing machine."
They said the Seattle-area software developer knowingly helped criminals launder $1 billion in dirty crypto, all the while pocketing millions in transaction fees.
The defense had countered that Storm was merely a software developer, and that he had no control over how Tornado Storm — built for legitimate privacy purposes — was used.
The software, accessible through the Ethereum blockchain, lets users deposit cryptocurrency into a common pool and then withdraw it days later.
The process made it virtually impossible for law enforcement or anyone else to track who was putting crypto in and who was taking it out.
But once the Tornado Storm software went live, it ran automatically and was out of Storm's hands, the defense had argued.
"Roman had nothing to do with the hackers and scammers," defense lawyer Keri Curtis Axel told the jury in opening statements.
"It's not a crime to make a useful thing that's misused by bad people," she said. "The government must prove that Roman had a criminal agreement with a criminal purpose, and it cannot."
Prosecutors told jurors a very different story.
Storm actively marketed to criminals who hoped to launder their stolen proceeds, they argued.
They showed the jury screenshots of marketing materials from Storm's home computer. The images included rough drafts of T-shirt designs featuring the Tornado Cash buzzsaw-styled logo imposed on a washing machine.
Jurors heard three weeks of testimony.
Prosecutors called a 23-year-old admitted NFT scammer to the stand. He described exchanging soap emojis with his girlfriend as he used Tornado Cash to launder $1 million in 2022. "Washy washy," the girlfriend joked, according to a text chain shown to jurors.
Victims took the stand to describe watching helplessly as their stolen crypto disappeared into Tornado Cash, including $196 million swiped by hackers from the cryptocurrency exchange BitMart.
"Our company does not have the ability to effect any change or take any action," BitMart attorney Joseph B. Evans told jurors, reading from the email he got back after alerting Storm that BitMart investigators had traced the stolen crypto to Tornado Cash.
Jurors also learned the basics of cryptocurrency and the how-tos of so-called cryptocurrency "mixers" like Tornado Cash.
Users would deposit crypto in multiple rounded quantities, jurors were told by the young NFT scammer, Andre Marcus Quiddaoen Llacuna, who testified under a cooperation agreement.
"You could deposit in increments of .1, one, 100, or 10," he said, referring to ETH, the cryptocurrency that's native to the Ethereum blockchain. "That way, it was harder to notice if anyone was pulling out the same amount later on," he explained.
He testified it took him about 20 minutes to deposit, in anonymized chunks, the 356 ETH he had stolen from his swindled investors, an amount worth some $1.1 million.
His deposits went into a shared "pool" of ETH. Tornado Cash generated a long, randomly-generated unique password that he used days later to withdraw the 356 ETH, again in increments of hundreds, tens, or ones.
While he waited, other people were likewise making and retrieving similarly rounded deposits, he said. Tornado Cash collected a transaction fee each time this was done, jurors were told.
Another government witness, an FBI cryptocurrency tracing expert named Joel Decapua, told jurors that between 2020 and 2022, criminals used Tornado Cash to launder $1 billion, the criminal proceeds from 16 major hacks and scams, each involving sums of more than $5 million. The money accounted for roughly half of Tornado Cash's volume for those years, the special agent testified.
The largest Tornado Cash deposit came from the so-called Ronin hack, a March 2022 cryptocurrency heist that US and world officials attributed to the North Korea-linked Lazarus Group.
The US Department of Treasury announced sanctions against the Lazarus Group in 2019, calling it a controlled entity of the North Korean government's primary intelligence bureau. (The UN issued similar sanctions in 2016.)
The Treasury's sanctions were updated and strengthened on April 14, 2022, after the Ronin hack, essentially making it illegal for anyone in the US to touch that stolen money.
"Guys, we are fucking done for," Storm told his colleagues soon after, according to a text shown to the jury.
Storm, a Russian expat living in Auburn, Washington, was one of three founders of Tornado Cash. Codefendant Roman Semenov remains a fugitive. The third founder, Alexey Pertsev, is under house arrest in the Netherlands while appealing his conviction on money laundering there.