Roman Storm Convicted in Tornado Cash Case Raising Developer Liability Concerns

The conviction of Roman Storm, co-founder of Tornado Cash, has sparked significant concern within the crypto community, with many warning it could set a “dangerous precedent” for open-source software developers and privacy rights [1]. On August 6, a federal jury found Storm guilty of operating an unlicensed money-transmitting business, a charge that carries a maximum sentence of five years. However, it could not reach a verdict on conspiracy to commit money laundering and conspiracy to violate U.S. sanctions, both of which could still be retried [1].

Storm, along with fellow co-founders Alexey Pertsev and Roman Semenov, developed Tornado Cash, a cryptocurrency mixer launched in 2019 that obscures the source of funds by randomizing transaction trails. The tool was sanctioned by the U.S. government in 2022 for its potential misuse in money laundering, and it was later delisted [1]. Pertsev was arrested in the Netherlands in August 2022 and is still fighting legal challenges there, while Semenov remains a fugitive on the FBI’s most wanted list [1].

Legal experts and industry advocates argue that the conviction overreaches by holding developers accountable for the actions of Tornado Cash users, particularly since the platform is non-custodial and does not control users’ funds. The Blockchain Association, a crypto industry lobbying group, stated that the verdict fundamentally misapplies money transmitter laws and could “criminalize developers of browsers, messaging apps, or any software misused by bad actors” [1]. This, they argue, threatens the future of decentralized finance (DeFi) and open-source development in the U.S.

Judge Katherine Failla denied a motion to dismiss the case in September 2024, ruling that Tornado Cash qualifies as a money transmitter regardless of the developers' control over the funds. This interpretation has raised concerns that it could be used to broadly criminalize software developers in the future [1]. The Solana Policy Institute echoed these worries, calling the conviction a “fundamental misunderstanding” of decentralized technology and how it operates outside traditional regulatory frameworks [1].

Andrew Rossow, a policy attorney at Rossow Law, called the split verdict a “referendum on individual agency in the age of open-source code.” While the guilty verdict on money transmission casts a shadow on developer liability, the inability to secure a conviction on the more severe charges suggests the legal system still recognizes that “code itself is not criminal” in censorship-resistant environments [1].

Industry groups are now pushing for legislative clarity. The Solana Policy Institute is advocating for the passage of the CLARITY Act, which would provide legal definitions for certain DeFi activities and carve out protections for developers [1]. The Blockchain Association also criticized the Biden administration’s approach to crypto regulation, urging the Trump administration—if re-elected—to avoid “regulation by prosecution.”

An appeal remains a strong possibility. Ji Kim, CEO of the Crypto Council for Innovation, stated that an appeal to the Second Circuit is necessary, and both the CCI and Blockchain Association have emphasized the need for legal clarity on the definition of a money transmitter [1]. As of now, Storm has not publicly commented on the conviction, and his sentencing date has yet to be set.

In response to the ruling, the Ethereum Foundation pledged to match $500,000 in donations to support Storm’s ongoing legal costs. Hsiao-Wei Wang, co-executive director of the foundation, stated, “Privacy is normal, and writing code is not a crime” [1]. The message reflects the broader sentiment in the crypto community that privacy-preserving technology should not be criminalized simply because it could be misused.

The case highlights the tension between regulatory enforcement and the decentralized ethos of blockchain development. As the legal battle continues, it remains to be seen whether this verdict will mark a turning point in how open-source software and DeFi projects are treated under U.S. law.

Source: [1] Roman Storm conviction for Tornado Cash sets ‘dangerous precedent’ (https://coinmarketcap.com/community/articles/689608b11214ff464aa18fe1/)