- Roman Storm, co-founder of crypto mixing tool Tornado Cash, was found guilty of operating an unlicensed money-transmitting business in New York.
- The jury could not reach a unanimous decision on two other charges: violating U.S. sanctions and money laundering.
- Storm’s conviction on the money-transmitter charge carries a maximum sentence of five years, notably less than the potential 20 years for the other charges.
- Legal experts and DeFi advocates warn the ruling could impact developers of non-custodial decentralized finance (DeFi) protocols across the U.S.
- Storm and his supporters plan to appeal, arguing U.S. regulatory guidance excludes anonymizing software providers from money transmitter definitions.
Roman Storm, co-founder of the decentralized crypto mixing service Tornado Cash, was found guilty in New York on conspiracy charges of operating an unlicensed money-transmitting business. The verdict was delivered yesterday in a federal court, with the jury deadlocked on two related charges of violating sanctions and money laundering.
The conviction centers on whether developing and releasing non-custodial software—a tool that obfuscates transactions without holding users’ funds—qualifies as running a money-transmitting business. If upheld, Storm faces a maximum of five years in prison, compared to the possible 20-year sentences for the other unresolved allegations.
Numerous figures in the decentralized finance (DeFi) industry have voiced concern over the possible precedent set by this case. Jake Chervinsky, a legal expert working with DeFi advocacy groups, stated, “Section 1960 should not apply to the developer of a non-custodial protocol who lacks control of user funds.” Michelle Korver from investment firm a16z highlighted that the decision, “could have a wide-ranging and unintended impact on the blockchain ecosystem as a whole” and might hinder U.S. leadership in crypto innovation.
At issue is the legal interpretation of “money transmitter.” According to 2019 guidance from FinCEN (the Financial Crimes Enforcement Network), “an anonymizing software provider is not a money transmitter.” However, Judge Katherine Polk Failla, who presided over the trial, ruled that controlling customer funds is not required to be considered a money transmitter under Section 1960 of U.S. law.
The result follows another recent case involving Samourai Wallet developers, who pleaded guilty to a similar money-transmitting charge in a plea deal. Legal observers believe this outcome could make appeals more complex for Storm and other non-custodial protocol developers.
In response to the verdict, Storm expressed determination to continue fighting, telling reporters, “The 1960 charge is bullshit and we’re going to fight it all the way.” DeFi advocacy groups, including Coin Center, are now supporting Storm’s planned appeal, seeking judicial clarification of whether running non-custodial software equals money transmission.
Litigation is also ongoing in another case filed by DeFi developer Michal Lewellen, who is challenging the Department of Justice’s classification of non-custodial protocols, comparing such software to an envelope used for mailing checks. Even Judge Failla acknowledged that the case raises important legal questions that may warrant further judicial review in the future.
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