Tornado Cash Developer Roman Storm’s Conviction Raises Concerns Over Privacy and Developer Liability in Crypto Industry

• Storm was found guilty of running an unlicensed money-transmitting business, facing up to five years in prison.

• The ruling could set a dangerous precedent for developers of privacy-focused technologies.

• Legal experts argue that the verdict misapplies money transmitter laws, threatening innovation in decentralized finance.

Roman Storm’s conviction raises serious concerns about the future of privacy in crypto, highlighting the need for regulatory clarity in the industry.

What is Roman Storm’s conviction about?

Roman Storm’s conviction relates to his role as a co-founder of Tornado Cash, a cryptocurrency mixer. The jury found him guilty of operating an unlicensed money-transmitting business, which could have far-reaching consequences for developers in the crypto space.

Why is this ruling significant for crypto developers?

The ruling has raised alarms among legal experts and industry observers, who argue it sets a dangerous precedent for open-source software developers. Critics maintain that developers should not be held liable for the actions of users on their platforms.

Frequently Asked Questions

What are the implications of Storm’s conviction for privacy in crypto?

Storm’s conviction threatens the privacy of users and could lead to stricter regulations on decentralized finance, impacting innovation in the sector.

How might this affect future software development?

The ruling may deter developers from creating privacy-focused technologies, fearing legal repercussions for user actions.

Key Takeaways

• Legal Precedent: Storm’s conviction sets a concerning precedent for developers.
• Privacy Risks: The ruling threatens user privacy in decentralized finance.
• Future of Development: Developers may face increased scrutiny and liability.

Conclusion

Roman Storm’s conviction highlights the urgent need for regulatory clarity in the crypto industry. As developers navigate these challenges, the future of open-source software and user privacy remains uncertain. The industry must advocate for clear guidelines to protect innovation and privacy.

• The conviction of Tornado Cash co-founder Roman Storm raises significant concerns about the future of privacy in the crypto industry.

• Legal observers warn that this ruling could set a dangerous precedent for developers of open-source software.

• Storm’s case highlights the ongoing tension between regulatory frameworks and the principles of decentralized finance.

Roman Storm’s conviction underscores the need for clearer regulations to protect developers and user privacy in the evolving crypto landscape.

Roman Storm convicted amid Tornado Cash money laundering concerns

Created in 2019, Tornado Cash is a cryptocurrency mixer and a privacy tool that masks the origin of funds. The tool, founded by Storm, Alexey Pertsev, and Roman Semenov, quickly drew the attention of regulators, particularly in the US, which sanctioned the project over its potential use for money laundering before delisting it in March.

Pertsev was arrested in August 2022 in the Netherlands, where he is facing a legal fight of his own. Storm was arrested in the US just one year later, while Semenov remains at large and is on the Federal Bureau of Investigation’s most wanted list.

Some have maintained that the Tornado Cash devs cannot or should not be held liable for the actions of the platform’s users, particularly if that platform, as was the case with Tornado Cash, did not have custody or control over the funds. Critics and the US government, particularly, maintained that they are responsible.

Judge Katherine Failla denied a motion to dismiss the case in September 2024, stating that Tornado Cash qualified as a money transmitter, regardless of whether the developers had control over the funds. As such, they should have enacted the same Anti-Money Laundering and Know Your Customer measures as any other such platform.

The privacy-focused crypto community has closely followed the case, and now, with Storm being found guilty, there is concern over what this means for decentralized finance (DeFi) and software development.

The Blockchain Association, a crypto industry lobby group in Washington, said on Wednesday that the ruling “sets a dangerous precedent for open-source software developers.”

The association also referred to an amicus brief in which it noted that Storm did not exercise control over the crypto that went through the protocol.

“Roman Storm built privacy tech that operated without his custody/control over the funds of Tornado Cash users. […] Tornado Cash functioned as non-custodial software, meaning that users maintained total control of their assets at all times,” the association said.

The Blockchain Association further stated that the verdict not only threatens open-source software but also “fundamentally misapplies money transmitter laws.” It concluded that this prosecution would “criminalize developers of browsers, messaging apps, or any software misused by bad actors, seriously threatening America’s leadership in tech.”

The Solana Policy Institute stated that the conviction means developers can face criminal liability even when they build non-custodial, open-source protocols that relinquish control through immutable smart contracts and have no ability to control misuse.

According to the group, this represents a “fundamental misunderstanding” of decentralized technology and how it can or should be regulated.

What’s ahead for Storm and open-source software development?

While far from the outcome the crypto industry wanted, not all is lost.

Andrew Rossow, policy and public affairs attorney and principal at Rossow Law, told Cointelegraph that the split verdict “isn’t just about a man or a mixer. It’s a referendum on individual agency in the age of open-source code.”

Rossow noted that while the verdict “casts a shadow” over developer liability, the fact that the jury was unable to come to a verdict on the other two charges “upholds the standard that code itself is not ‘criminal’ — especially in censorship-resistant, permissionless environments.”

The question of “whether creators of neutral software should bear criminal responsibility for its misuse” remains. According to Rossow, the case also exposes the justice system’s current inability to comprehend and adjudicate decentralized technology.

And still, “the jury’s silence on the hardest questions is the opening for the industry to speak.”

Industry groups are planning to do just that. The Solana Policy Institute is pressing for Congress to pass the CLARITY Act, which, among other things, would give legal definitions and carve-outs for some aspects of DeFi activity.

The Blockchain Association stated that the administration of US President Donald Trump needs to stop “regulation by prosecution,” a reference to the more commonly used phrase “regulation by enforcement” that characterized regulators’ approach to crypto under former President Joe Biden.

There is also the possibility of an appeal. “The fight isn’t over,” said Crypto Council for Innovation (CCI) CEO Ji Kim. “An appeal to the Second Circuit awaits. Regulatory clarity is also needed to clarify the definition of a money transmitter,” he said.

The CCI, another crypto industry lobby group, called an appeal “necessary,” while the Blockchain Association urged the same.

Storm has made no public statements following his conviction. It is still unknown whether he will seek an appeal, and his sentencing date is pending.

The crypto industry and its supporters will clearly not take the verdict lying down. One day after the ruling, the Ethereum Foundation pledged to match $500,000 to Storm’s continued legal expenses. Hsiao-Wei Wang, co-executive director of the foundation, said, “Privacy is normal, and writing code is not a crime.”

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