Cryptoprivacy on trial: jury to decide if Tornado Cash's Roman Storm is a $1B money launderer or a free speech hero
Jury selection begins Monday, and cyberprivacy advocates say the verdict will shape the very future of decentralized finance, or DeFi. That's the blockchain-based system where users can lend, borrow, and earn interest on cryptocurrencies person to person, bypassing banks, exchanges, or the stock market.
According to fxstreet.com, an online resource for currency traders, the DeFi market has a market value of about $121 billion.
Opening statements may begin as early as Tuesday.
"If I lose my case, DeFi dies with me," the trial's lone defendant, Seattle-based software developer Roman Storm, rather dramatically pronounced in a podcast a week ago.
Storm is one of the creators of Tornado Cash, a software tool that digitally "mixes" cryptocurrency, scrambling transactions to make them even more anonymous. It lets users deposit and withdraw crypto from a shared pool, obscuring their identities.
Federal prosecutors say that between 2019 and 2022, the 35-year-old Russian expat knowingly let hackers and fraudsters use Tornado Cash to scramble and launder more than $1 billion — and made millions himself in the process.
"The Tornado Cash service was used to launder large volumes of criminal proceeds with the knowledge and participation of the defendant," Assistant US Attorney Thane Rehn told the judge in 2023, when Storm pleaded not guilty at his first Manhattan court appearance.
Prosecutors are particularly concerned over the hundreds of millions of dollars in crypto they say Storm laundered for the Lazarus Group, the notorious North Korea-sponsored cybercrime organization credited with the 2014 Sony Pictures hack, an $81 million Bangladeshi bank heist in 2016, and the 2017 WannaCry ransomware attacks.
Federal and UN officials say Kim uses the Lazarus Group to fund his nuclear missile program.
In 2022, the Biden Treasury Department barred US citizens from using Tornado Cash, saying that Lazarus Group and other cybercrooks used it to launder more than $7 billion in criminal proceeds. The Trump Treasury Department lifted these sanctions without explanation in March.
A DeFi cause célèbre
Storm is now a cause célèbre among DeFi and blockchain privacy advocates.
Amicus briefs on his behalf have been filed by the Blockchain Association, Coin Center, the DeFi Education Fund, Paradigm, and the Electronic Frontier Foundation.
He has received significant financial support as well.
According to FreeRomanStorm.com, more than $2.5 million in the Ethereum network-backed cryptocurrency Ether has been donated for Storm's and fellow Tornado Cash developer Alexey Pertsev's legal defense, thanks to fundraising by the Ethereum Foundation, Paradigm, and others.
Pertsev was convicted of money laundering in a Dutch court last year. A third Tornado Cash cofounder, Roman Semenov, was charged with Storm but remains a fugitive.
The defense contends in court filings that Storm never had control over or custody of the money that passed through his cryptocurrency mixing tool and never knowingly helped cybercriminals.
"I did not have any contact whatsoever with any criminals, any criminal organizations, any illicit actors, any North Koreans," Storm said on the podcast Crypto in America.
Prosecutors say communications show otherwise, including one in which Storm told his cofounders, "Guys, we're fucked" as the bits, so to speak, hit the fan.
Privacy advocates and Storm himself complain that his prosecution persists despite a DOJ memo in April announcing the office "will no longer target virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end uses."
"The Department of Justice is not a digital assets regulator," said the memo. Signed by Trump lawyer-turned-Deputy US Attorney General Todd Blanche, it criticized the Biden administration for "pursuing a reckless strategy of regulation by prosecution."
Attorneys for Storm did not respond to requests for comment on Friday. A spokesperson for the US Attorney's Office in Manhattan declined to comment on the ongoing case.
Tornado Cash keeps spinning
Tornado Cash, meanwhile, keeps spinning along.
Storm told the Crypto in America podcast last week that all he did was write code. "I did not feel I'm responsible for managing how somebody's using the software," he said.
And once the code for Tornado Cash was let loose into the DeFi world, it basically ran automatically, he told the podcast. He couldn't flip the off switch if he tried, he said, because no such switch exists.
"Correct," Storm answered when the podcasters asked if Tornado Cash is still up and running. "It's always been running. Just like the Ethereum network, or the bitcoin network, or the internet," he said.
"It's immutable and decentralized," he said. "It's unstoppable."
Storm remains free on $2 million bail and faces up to 40 years in prison if convicted.
"I don't have a 100% answer right now," he said when the podcasters asked if he intends to take the stand. "I may, or may not."
The trial is expected to last at least three weeks.
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