Justice Department Drops Some Charges Against Tornado Cash Co-Founder

US federal prosecutors are moving forward with their case against Roman Storm, the co-founder of Tornado Cash, but have decided to drop a portion of the indictment. This decision comes after the Department of Justice revised its approach to crypto enforcement in April. The revised stance, outlined in a memo by Deputy Attorney General Todd Blanche, indicates that the Justice Department will no longer prosecute crypto mixers like Tornado Cash for the actions of their end users or for unintentional regulatory violations.

In a letter to federal court judge Katherine Polk Failla, Jay Clayton, the acting US Attorney for Manhattan, confirmed that the charges against Storm would proceed, except for the accusation that he failed to comply with money transmitting business registration requirements. This charge was part of the broader allegation that Storm conspired to operate Tornado Cash as an unlicensed money transmitter. The government will still pursue the charge that Storm transmitted funds knowing they were derived from criminal activities or intended to support unlawful endeavors.

The Justice Department has alleged that Tornado Cash was used to launder over $1 billion worth of cryptocurrency, including transactions linked to the North Korean state-backed hacking group, the Lazarus Group. In addition to the charge of transmitting funds derived from criminal activities, the government will also pursue two other charges: one count of money laundering conspiracy and one count of conspiracy to violate US sanctions. Each of these charges carries a maximum sentence of 20 years in prison, while the unlicensed money transmitter conspiracy charge, which has been dropped, carried a maximum sentence of five years.

Storm has pleaded not guilty to all charges and his trial is scheduled for July 14. He was charged alongside his co-founder Roman Semenov, who is currently at large and believed to be in his native Russia. The revised approach to crypto enforcement by the Justice Department has also led other crypto executives facing similar charges to cite Blanche’s memo in attempts to have their cases dismissed. For example, co-founders of the crypto mixer Samourai Wallet, Keonne Rodriguez and William Hill, have used the memo to try to dismiss their charges of conspiracy to operate an unlicensed money transmitter and money laundering conspiracy. Additionally, Braden John Karony, the CEO of crypto firm SafeMoon, has cited the memo in an effort to have the charges of securities fraud, wire fraud, and money laundering conspiracy against him dismissed.