Tornado Cash Co-Founder Faces Trial Amid $1 Billion Money Laundering Allegations

Roman Storm, the co-founder of Tornado Cash, is scheduled to face trial on July 14 at a Manhattan Federal Court. He is charged with conspiring to launder money and operating an unlicensed money transmitter. Tornado Cash is a cryptocurrency-mixing service designed to enhance user privacy, but it has also been used by hackers to launder funds from exploited platforms. The Ethereum Foundation (EF) has expressed support for Storm, emphasizing that privacy is a normal right and that writing code is not a criminal act.

The EF has been supportive of Storm since his indictment in August 2023 for his role in developing Tornado Cash. US authorities allege that the mixing service has been used to launder over $1 billion in illicit funds. Tornado Cash allows users to obscure the link between a sender and receiver, thereby anonymizing their transaction history. US authorities believe this service has enabled criminals to conceal their illicit transactions and profit from illegal activities. Storm’s defense argues that the case against him poses a threat to open-source innovation and could stifle future developments in the DeFi market.

US authorities have shifted their approach to regulating cryptocurrencies. The case against Roman Storm follows a period where the new administration has scaled back regulatory activities against crypto developers. In December 2024, the US Treasury’s Office lifted its sanctions against Tornado Cash. Storm’s defense has argued that the case against their client should be dismissed, given the regulators' changed stance towards the mixer service.

Storm has taken to X to express his concerns about the upcoming trial, stating that the Department of Justice (DOJ) aims to bury the DeFi market. He explained that US authorities wanted him to implement Know Your Customer (KYC) procedures with the mixing service, which would have rendered the service ineffective. Storm also claimed that the DOJ is blocking his witnesses from testifying, which, if successful, would crush the DeFi market.

The DOJ has dismissed Storm’s expert witnesses from participating in the court case. Storm asserted that US authorities are attempting to crush him during the trial. The expert witnesses were prepared to provide insights into digital privacy, blockchain technology, and KYC requirements. Storm’s defense team argued that KYC requirements could not be applied to Tornado Cash. However, prosecutors deemed these topics irrelevant to the current case. The first expert witness, Matthew Green, was dismissed because he did not disclose any relevant opinions to the case. Prosecutors noted that Green provided details about the Tornado Cash protocol that could have been relevant. The DOJ scrutinized all of Storm’s expert witnesses, questioning the relevance of their testimony and criticizing them for judging the appropriateness of KYC requirements for Tornado Cash. According to the DOJ, such judgments should be reserved for the judge, not the expert witnesses.

The Ethereum Foundation (EF) has donated funds to support Storm’s defense and pledged to match up to $750,000 donated from the community. The EF believes that Storm is innocent and should not be prosecuted for creating privacy-enabling technologies. Storm is raising funds for his trial next month, aiming to collect $2 million. He was indicted in 2023 for conspiring to commit money laundering and immediately cited the First Amendment as a defense to dismiss the charges.

In a related development, a hacker who stole $23 million in crypto from an exchange in 2023 is beginning to launder the funds through Tornado Cash. The hacker sent $30 million to Tornado Cash to anonymize the funds. The hacker made money from the stolen funds by selling ETH tokens and buying them when the price of Ethereum was much lower. It is unclear whether the hacker is acting alone or as part of a group. The actions of hackers may further complicate the ongoing case against Storm, as DOJ officials may see the actions of hackers as evidence that the privacy-focused service facilitates criminal activity.