Latest news with #TornadoCash
Yahoo
7 hours ago
- Business
- Yahoo
As Roman Storm mounts his defence, a judge bars ‘self-serving' evidence
Tornado Cash co-founder Roman Storm began his defence in earnest Monday, though a federal judge ruled he could not present 'self-serving' evidence at his criminal trial that includes private messages in which the software developer lamented cybercriminals' use of the protocol. That evidence would show Storm did not intend for Tornado Cash to serve as a money laundering tool for cybercriminals, defence attorneys wrote in a letter to Judge Katherine Polk Failla on Sunday. Failla disagreed. Most of the messages did not offer any insight into Storm's state of mind when he created and contributed to the Tornado Cash protocol, she said Monday. Prosecutors have charged Storm with conspiracy to commit money laundering, operate an unlicensed money-transmitting business, and violate US sanctions. He faces more than 40 years in prison. 'Spitballing' In order to prove the money laundering charge, prosecutors must show that Storm built and ran Tornado Cash for cybercriminals. On Thursday, a prosecutor called money launderers Storm's 'primary target market.' One government exhibit shows Storm wearing a t-shirt featuring a washing machine and the Tornado Cash logo. But Storm has said that he built Tornado Cash for people seeking privacy on the blockchain and that he was powerless to prevent cybercriminals from using the protocol to launder stolen crypto. In June 2022, crypto forensics firm Elliptic traced to North Korean hackers almost $100 million in assets that were stolen from the Harmony blockchain and laundered through Tornado Cash. 'I'm glad those fuckers are detected,' Storm said in a group chat featuring the Tornado Cash co-founders and executives at Dragonfly Capital. Failla said Storm could show the message to jurors. But she denied his request to share other messages. In a July 2020 exchange with Dragonfly executive Haseeb Qureshi, Storm said that guidance from the Financial Crimes Enforcement Network led him to believe Tornado Cash was a legal business. 'I agree, which is why we want to invest. We are convinced what you guys are doing is legal,' Qureshi replied. Failla said the exchange was not indicative of Storm's state of mind when he committed his alleged crimes. In an October 2020 group chat with co-founders Roman Semenov and Alexey Pertsev, Storm fumed that 'we are getting shit on as if we are criminals of some sort.' Semenov suggested they attract more 'regular users.' 'Now all sorts of terrorists also use cash but no one calls the dollar a scam because of that,' Semenov wrote. 'I understand all that, Roma… I am just concerned,' Storm replied. 'It's unfortunate that people don't understand what we want to do.' Failla called the exchange a mere 'gripe session' on Monday. Compliance As the trial entered its third and final week, Storm's defence began in earnest by calling as a witness cryptography expert Matt Edman. Edman testified there was little that Storm could have done to limit money laundering on Tornado Cash, rebutting claims from a government witness who said that Storm had declined to make simple changes that could have deterred cybercriminals. While Storm and his co-founders repeatedly added anti-money laundering features to Tornado Cash — features that were uncommon among other crypto projects — they were easily circumvented, according to Edman. But it wasn't for lack of effort, Edman suggested. Rather, those tools were ineffective because earlier versions of the Tornado Cash website and other components of the protocol are stored on the InterPlanetary File System, or IPFS — a decentralised data storage system. 'So through this system you really can't make old content go away?' defence attorney Keri Axel asked Edman. 'No,' he replied. In at least one case, a hacker appeared to circumvent an anti-money laundering tool by using an older version of Tornado Cash's so-called router, Edman said. One such tool blocked sanctioned crypto wallets from accessing the protocol through the Tornado Cash website. The Tornado Cash founders installed that tool in April 2022 — just one month after it was released by crypto forensics firm Chainalysis. It worked as intended — no sanctioned wallets interacted directly with Tornado Cash after the tool was installed, according to Edman. But getting around the tool was as easy as creating new intermediary wallets, Edman said. Because the US Treasury Department could not sanction these intermediary wallets in real time, the tool could not prevent sanctioned entities, such as North Korea, from using Tornado Cash. Edman also testified that 85% of the crypto deposited in Tornado Cash between September 2020 and August 2022 could not be traced to crime. On Tuesday, defence attorneys expect to call as many as six witnesses, including Columbia University adjunct professor Omid Malekan and Johns Hopkins University associate professor Matthew Green. Storm has yet to decide whether he will testify in his own trial, defence attorney Brian Klein said on Monday. If Storm does not testify, both sides expect to present their closing arguments on Wednesday. Aleks Gilbert is DL News' New York-based DeFi Correspondent. Reach out to him with tips at aleks@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
7 hours ago
- Politics
- Yahoo
Privacy talk off-limits in Roman Storm trial, prosecutors argue
The government doesn't want anyone talking about privacy during the criminal trial of Tornado Cash co-founder Roman Storm — unless it's Roman Storm. On Wednesday, prosecutors asked Judge Katherine Polk Failla to bar the software developer's attorneys and witnesses from discussing 'privacy rights,' arguing it could move sympathetic jurors to acquit Storm even if they think he's guilty. Only Storm should be permitted to discuss privacy, prosecutors said. That's because the jurors asked to determine his guilt — or lack thereof — are allowed to consider whether he intended to break the law when he co-created Tornado Cash. And only Roman Storm knows why Roman Storm built the protocol that became so popular with privacy-minded crypto users and cybercriminals alike. Storm has been charged with conspiracy to commit money laundering, operate an unlicensed money-transmitting business, and violate US sanctions. He faces 45 years in prison. In June, prosecutors sought to bar evidence they deemed irrelevant to those charges. Such evidence included claims that 'victims of fraud or hacking were negligent or gullible'; that some customers 'used the service for purportedly lawful or sympathetic purposes'; and evidence 'aimed at jury nullification,' including the claim that building Tornado Cash was 'protected by constitutional rights to freedom of speech and privacy.' Jury nullification refers to jurors' decision to acquit someone they believe is guilty because they think the law or punishment is unfair. Among the most notable examples is that of abolitionists refusing to convict runaway slaves in the 19th century. 'Privacy rights, I understand those aren't being discussed,' Failla said last week. 'If he testifies, Mr. Storm can discuss his beliefs about the importance of privacy.' 'Irrelevant and inflammatory' During Tuesday's opening arguments, however, one of Storm's attorneys said most Tornado Cash users were normal people seeking privacy on Ethereum — not cybercriminals. She referred to 'the right to keep your financial transactions private from the public' a right 'that many of us take for granted.' 'How would you feel if someone took your bank account and published it on the internet?' she continued. 'You would not feel very safe.' Prosecutors weren't happy. 'It is now necessary to preclude evidence and arguments based on privacy rights,' they wrote in a Wednesday filing. 'Storm plainly suggested to the jury that his conduct should be protected by privacy rights— appealing to their sense of their own personal privacy rights—and in no way limited or tied the argument to his state of mind.' Storm intends to call Johns Hopkins professor and Zcash co-founder Matthew Green as a witness, prosecutors noted. And Green is expected to say blockchains' lack of privacy has exposed investors to threats and kidnappings testimony prosecutors called 'irrelevant and inflammatory.' In their own filing on Thursday, Storm's attorneys said they were not trying to lead jurors astray. Tuesday's opening statement 'did not say that the 'right to privacy' negates criminal liability,' they wrote. 'But the defense must be permitted to present evidence and arguments regarding the many legitimate needs for privacy and why Mr. Storm's intent to protect privacy did not equate to criminal intent.' Storm's attorneys also pointed to comments Failla made last week, before the trial began. 'I'm fine if you want to ask your witness why people might like privacy or why certain things exist,' she said. Storm's trial, which began Monday, is expected to last three weeks. Aleks Gilbert is DL News' New York-based DeFi correspondent. You can reach him at aleks@
Yahoo
7 hours ago
- Business
- Yahoo
Axie Infinity exec, NFT scammer testify in Roman Storm trial
Validators, relayers, and private keys. Self-custody and 'smart contract logic.' Decentralised autonomous organisations. HODL. Jurors in the trial of Tornado Cash co-founder Roman Storm were buried under an avalanche of crypto jargon on Wednesday as prosecutors' witnesses explained — or tried to explain — the basics of blockchain technology. Those witnesses included Viet Anh Ho, the chief technology officer at Axie Infinity developer Sky Mavis, and 23-year-old Andre Llacuna, one of the people behind a $1.1 million NFT scam. Their testimony continued prosecutors' effort to show that Tornado Cash was the tool of choice for cybercriminals attempting to launder dirty crypto. Storm has been charged with conspiracy to commit money laundering, operate an unlicensed money-transmitting business, and violate US sanctions. He faces 45 years in prison. Testimony Ho recalled how hackers affiliated with North Korea tricked a Sky Mavis employee into downloading malicious software. The hackers then stole more than $600 million in crypto from the software bridge connecting Ethereum and Sky Mavis' blockchain. Much of that crypto was laundered through Tornado Cash. Llacuna detailed his own scheme to steal crypto worth more than $1 million in 2022. That year, the young hairdresser and one of his clients created 8,888 NFTs featuring images of anthropomorphic scoops of ice cream called 'Frosties.' They drummed up interest in the project, promising would-be investors a Frosties-themed videogame and other features that could boost the NFTs' price. They managed to sell all 8,888 Frosties for 0.04 Ether apiece — a total of $1.1 million. Llacuna and his partners promptly deleted the Frosties website and social media accounts. Soon, they tried splitting their haul among fresh crypto wallets. But they realised that wouldn't be enough to cover their tracks. 'It was obvious to us that no matter how many wallets we sent it in and out of, it would still be traceable,' he told jurors Wednesday. One of Llacuna's partners suggested they use Tornado Cash. 'It seemed like the best option for us to hide the money and get away with it,' he said. Llacuna was arrested in March 2021. He pleaded guilty to two counts of fraud, but has yet to receive a sentence. He said Wednesday he was testifying in hopes he would receive a lenient sentence. A third witness, Tornado Cash enthusiast Justin Bram, was asked to explain how the crypto mixer works. Bram made an educational video about Tornado Cash in 2021 and soon began exchanging messages with the protocol's co-founders. They eventually suggested he take a position co-managing a pool of Tornado Cash tokens that could be used to fund marketing initiatives or research. Bram detailed its so-called relayer system, which makes crypto transfers untraceable. He explained how an 'anonymity mining' program offered Tornado Cash tokens to people who deposited and left their crypto in the protocol, beefing its transaction-cloaking capabilities. Bram said he ended his Tornado Cash affiliation in 2021 because 'the regulatory climate was heating up.' Hackers were sending money to Tornado Cash, 'and it seemed like a bad look,' he said Wednesday. But he also said the protocol provides a key service for Ethereum users who want or need privacy. And Storm had never asked him to make videos 'pitching Tornado Cash to money launderers.' 'Moment of radicalisation' Storm's attorneys, in turn, continued their attempt to reframe Tornado Cash in jurors' minds. It was not a tool built for and marketed to money launderers, Storm's attorneys suggested, but a tool for the privacy-conscious that was simply misused by cybercriminals. Under questioning from one of Storm's attorneys, Llacuna acknowledged Tornado Cash was easy to find online — not some forbidden software he had to use the so-called dark web to access. Indeed, US citizens can legally use the crypto mixer. But that wasn't always the case: In 2022, the US sanctioned Tornado Cash, making it a crime for any US citizen to use the protocol. 'The original Tornado Cash blacklist by OFAC was sort of a moment of radicalisation for me,' Tim Clancy, a member of the Silviculture Society, a group that advises the Ethereum Foundation, told DL News outside Storm's courtroom Wednesday. 'Tornado Cash was filling an extremely valuable role.' The sanctions were lifted this year after a group of Tornado Cash users successfully challenged them in court. A federal appellate judge found the government did not have the authority to sanction self-executing software that was, for all intents and purposes, owner-less. That Storm still faces a decades-long prison sentence is a grave injustice, Clancy said. He traveled from Boston to support the embattled software developer. Clancy wasn't the only person who traveled in a show of solidarity. Storm has become a cause célèbre among crypto enthusiasts, who consider his prosecution an attempt to stifle the development of privacy-preserving software. HAI developer Ameen Soleimani was in attendance Wednesday, and other notable crypto developers and enthusiasts plan on attending Storm's trial in the coming days. Clancy said he has personally donated more than $100,000 to Storm's defence — and has a plan to donate more. On Wednesday, he brought a copy of 'PGP: Source Code and Internals,' a book by software engineer Philip Zimmermann. While Zimmermann never faced criminal charges, he became a target for US authorities in the 1990s after publishing online the source code for his Pretty Good Privacy encryption protocol. Clancy spent $600 to buy the book, he said. After just one print run, it has become hard to find. He intends to ask Storm to sign the book. If Clancy succeeds, he'll auction the signed book and donate the proceeds to Storm's defence, he said. 'We don't want him to be martyred,' Clancy said. Aleks Gilbert is DL News' New York-based DeFi correspondent. You can reach him at aleks@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
7 hours ago
- Business
- Yahoo
Roman Storm prosecutors attack privacy ‘distraction' in closing arguments
Federal prosecutors told jurors that privacy was a mere 'cover story' and a 'distraction' during their closing argument in the criminal trial of Tornado Cash co-founder Roman Storm. On Wednesday, both sides summed up two-and-a-half weeks of evidence that featured testimony from federal agents, blockchain experts, scammers, and scam victims, as well as a trove of private messages in which the Tornado Cash co-founders agonized over cybercriminals' use of the protocol and what, if anything, they should do about it. Storm's fate now rests with a group of 12 jurors, who skew young and well-educated — 10 are younger than 50, and five are younger than 30. Nine have college degrees. Minutes after beginning their deliberation Wednesday afternoon, jurors said they would break for the day and return Thursday morning. Prosecutors have charged Storm with conspiracy to commit money laundering, operate an unlicensed money-transmitting business, and violate US sanctions. He faces more than 40 years in prison. His prosecution has galvanized crypto proponents who fear financial and technological privacy rights are in jeopardy. A guilty verdict could have far-reaching consequences, according to Storm's supporters and a leading civil liberties organisation, as it would imply that many developers of privacy-enhancing software can be held criminally liable for their work. Earlier in the trial, a federal judge rejected prosecutors' attempt to forbid references to privacy — they feared it could improperly skew jurors' ultimate decision — though she barred any discussion of a 'right to privacy.' Now, jurors will have to decide what Storm sought to accomplish when he created Tornado Cash in 2019. 'Dark underbelly' Prosecutor Benjamin Gianforti said that any talk of privacy was a 'distraction.' The trial had given jurors a 'front-row seat to the dark underbelly of global financial crime,' he said as he began his closing statement. 'What do these criminals need to get away with their crimes? A way to make that dirty money clean.' And Storm and his co-founder saw an opportunity to make money of their own, according to the prosecutor. 'The real money wasn't in so-called 'privacy' for normal people,' Gianforti said. 'It was in hiding dirty money for criminals.' Over two years, Tornado Cash laundered at least $1 billion in dirty crypto, he said, pointing to the government's own analysis of blockchain data. For brief periods, more than half the crypto deposited in Tornado Cash could be attributed to hacks or scams. Gianforti likened Tornado Cash to a restaurant that serves real food, or a laundromat that actually cleans clothing — those businesses can serve genuine, above-board customers, but if they exist primarily to launder money, they're still breaking the law, he said. And he rejected claims the co-founders of Tornado Cash were powerless to stop money laundering on the platform. 'For Tornado Cash, decentralisation was the big lie,' Gianforti said. The trial often veered into highly technical discussion of the protocol's inner workings, with government witnesses attempting to portray the tool as a run-of-the-mill business almost wholly controlled by its founders. Defence witnesses, meanwhile, have said that control was highly circumscribed and, in any case, did not apply to the protocol's most important components. Gianforti appeared to dismiss the notion that privacy-enhancing technology could have a non-criminal purpose. 'Isn't anonymity just another word for concealment?' he said. 'Remember, when the defence says 'privacy,' what they really mean is 'hiding money for criminals.'' 'Utterly wrong' Defence attorney David Patton said Storm built the protocol to solve a pressing issue in the crypto industry: the fact that every blockchain transaction and account can be viewed by anyone with internet access and a little know-how, exposing well-heeled users to scams and hacks. 'The government has this completely, utterly wrong,' Patton said. 'He didn't want [scammers] to use Tornado Cash. He did not have a financial interest in them using Tornado Cash.' The protocol did not represent the 'dark underbelly' of anything, he continued, Instead, it was a well-intentioned project that had its origins in a 2019 hackathon at Harvard University. It eventually drew a $900,000 investment from one venture capital firm and significant interest from another, signs it was widely regarded as a legal product that could appeal to regular people, Patton said. Tornado Cash makes it difficult, if not impossible, to trace crypto transactions on Ethereum and several other blockchains. 'Did that make it very useful to criminals? Of course it did,' Patton said. But that was true of many other everyday items. 'Probably the most obvious example is something you check in at the courthouse every day: your phone.' He emphasized to jurors that Tornado Cash itself is not illegal — something a federal appeals court confirmed last November — and said that private messages showed Storm did not want cybercriminals to use it. 'If the government was right,' Patton said, 'would you not expect [the founders] to say … 'We're kind of rolling in it with the Ronin hacks — how can we get the word out about this?'' Instead, he said, the founders panicked when they realised crypto worth hundreds of millions of dollars was stolen from the Ronin blockchain and laundered through Tornado Cash. At the end of his closing remarks, Patton worried he had not sufficiently explained certain highly technical concepts. Still, he continued, 'I promise you, there is nothing [prosecutors] can say that doesn't have a response.' Aleks Gilbert is DL News' New York-based DeFi correspondent. You can reach him at aleks@
Yahoo
11 hours ago
- Business
- Yahoo
Samourai Wallet devs plead guilty to money-transmitting charge as Tornado Cash verdict looms
The co-founders of a popular Bitcoin mixing service pleaded guilty on Wednesday to conspiracy to operate an unlicensed money transmitting business. Samourai Wallet co-founders Keonne Rodriguez and William Lonergan Hill did not plead guilty to a separate money laundering charge. They will be sentenced in November. Their plea deal in US court in New York came amid closing arguments in the separate criminal trial of Roman Storm, the co-founder of Tornado Cash, another so-called crypto mixer. Jurors in that case could deliver a verdict as early as Wednesday. Crypto privacy Like the Samourai co-founders, Storm is facing charges of conspiracy to launder money and to operate an unlicensed money transmitting business. But the Tornado Cash co-founder has also been charged with conspiracy to violate US sanctions. He faces more than 40 years in prison. The prosecution of the developers behind Samourai Wallet and Tornado Cash have galvanized crypto proponents who fear financial and technological privacy rights are in jeopardy. Guilty verdicts would have far-reaching consequences, they say, as they would imply that many developers of privacy-enhancing software can be held criminally liable for their work. Whirlpool feature Launched in 2015, Samourai Wallet is a mobile Bitcoin wallet available on the Google Play store, where it was downloaded more than 100,000 times, according to court papers. It was removed from the store after the founders were charged last year. In 2017, the venture launched a privacy-enhancing feature called Ricochet, which routed Bitcoin transfers through additional wallets to complicate attempts to trace the Bitcoin to its ultimate destination, prosecutors said. Two years later, Samourai launched the Whirlpool feature, which mixes users' Bitcoin, making it difficult, if not impossible, to trace. More than $2 billion in Bitcoin has passed through the Ricochet and Whirlpool features, according to court papers. About $250 million of that Bitcoin came from various hacks and scams, prosecutors allege. And the Samourai co-founders had knowledge of this activity, according to the indictment. In a WhatsApp exchange in January 2018, Rodriguez, asked to explain what 'mixing' was, replied, 'money laundering for Bitcoin,' said court papers. 'Samourai Wallet was overwhelmingly used — by tens of thousands of everyday people.' On Dread, a darkweb alternative to Reddit, one user in the 'laundromat' forum asked other users to recommend 'secure methods to clean dirty BTC' so they would 'never get caught.' Hill recommended Samourai Whirlpool, according to the indictment. Legitimate purpose While dirty Bitcoin flowed through Samourai, Rodriguez and Hill ran a Samourai server and paid for web hosting services and Google Play store fees. By April 2024, they had collected a cumulative $4.5 million in fees from Samourai users, according to the indictment. For months, Rodriguez and Hill fought the charges, echoing claims Storm has made in his defense. 'Far from the money-laundering bogeyman portrayed by DOJ, Samourai Wallet was overwhelmingly used — by tens of thousands of everyday people — for a legitimate purpose: to keep their private financial information private,' Rodriguez's attorney wrote in a motion to dismiss the charges. 'Essentially, Samourai allowed users to avoid posting the cryptocurrency-equivalent of their private credit card or bank statements on the internet for all the world to see.' Key to the developers' defence was 2019 guidance from the Treasury Department's Financial Crimes Enforcement Network, or FinCEN, which stated 'an anonymizing software provider is not a money transmitter.' Indeed, officials at FinCEN reiterated that view in a call with prosecutors in August 2023 — six months before the prosecutors charged the Samourai co-founders. 'Because Samourai does not take 'custody' of the cryptocurrency … that would strongly suggest that Samourai is NOT … acting as an [money services business],' one of the prosecutors wrote in an email summary to their supervisor. The substance of that call became a point of controversy in May, when defence attorneys complained that prosecutors had not furnished the potentially exculpatory information until they were asked for it directly. Before Wednesday's plea agreement, Rodriguez and Hill were set to go to trial in November. Letter campaign The allegation that the founders ran an unlicensed money-transmitting business drew substantial criticism from the crypto industry and its supporters. In May 2024, Senators Cynthia Lummis, a Republican from Wyoming, and Ron Wyden, a Democrat from Oregon, wrote then-Attorney General Merrick Garland to protest the Department of Justice's 'unprecedented' interpretation of the federal money-transmitting law, which, they said, threatened to criminalise developers of non-custodial crypto software. And in March, more than 30 crypto companies and lobbying firms signed a letter to lawmakers decrying prosecutors' decision to bring money-transmitting charges against the Samourai and Tornado Cash co-founders, writing, 'under this interpretation, essentially every blockchain developer could be prosecuted as a criminal.' A month later, the Department of Justice published a four-page memo stating it no longer intended to pursue cases in which it charges crypto mixers 'for the acts of their end users or unwitting violations of regulations.' Nor would it pursue charges for unlicensed money transmitting, violations of the Bank Secrecy Act, or failure to register with US financial regulators without evidence the mixers knew of those requirements. In a footnote, however, the department said it was not changing its guidance in cases where business owners know they're handling dirty money. Rodriguez and Hill were arrested in the US and in Portugal, respectively, in April 2024. Aleks Gilbert is DL News' New York-based DeFi correspondent. You can reach him at aleks@ Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
