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Roman Storm and Roman Semenov: What Next for Tornado Cash Bosses After Alexey Pertsev Found Guilty?

Last Updated May 15, 2024 9:46 AM
Teuta Franjkovic
Last Updated May 15, 2024 9:46 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • A Dutch court convicted Alexey Pertsev for laundering money through the cryptocurrency mixer.
  •  The conviction raises significant concerns regarding the responsibilities of software developers in the DeFi sector.
  • Following the conviction, authorities have taken strict actions against Roman Storm and Roman Semenov.

On May 14, a court in the Netherlands found Tornado Cash developer Alexey Pertsev guilty of laundering $1.2 billion through the cryptocurrency mixer.

The news comes as his fellow Tornado Cash developers Roman Storm and Roman Semenov face trial in the United States. The American Authorities argue Storm and Semenov are criminally liable if their software is misused by bad actors years after its creation, even if they were not directly involved.

Implications of Alexey Pertsev’s Conviction for DeFi Privacy

The s-Hertogenbosch court found the 31-year-old Russian guilty of money laundering and sentenced him to 64 months in prison.

A member of the three-judge panel that convicted Pertsev said:

“Tornado Cash primarily serves as a criminal tool. It fully accommodates users with illicit intent.”

During the trial, prosecutors argued that Pertsev did not implement sufficient controls to prevent the misuse of Tornado Cash.

In defense, his team emphasized the decentralized, open-source nature of the smart contracts that operate Tornado Cash. They argued that it was unreasonable to blame Pertsev for the users’ independent and anonymous actions. Tornado Cash is a decentralized protocol obscuring the Ethereum blockchain’s transaction histories.

The verdict against Pertsev has left many in the cryptocurrency industry disheartened. However, industry insiders suggest that similar cases in the US later this year could see different outcomes due to variations in American laws.

According to the Dutch court:

“The court considers it legally and convincingly proven that the suspect, together with others, was guilty of laundering the Ether from a crime included in the indictment and that he has made a habit of this laundering.”

US v. Tornado Cash: Is Coding a Crime?

Last year, US authorities charged co-founders Storm and Roman Semenov  with several crimes. These included:

  • Conspiracy to commit money laundering.
  • Violations of sanctions.
  • Operating an unlicensed money transmitting business.

At the time of the indictment, Semenov remained at large.

Storm’s defense team filed a motion to dismiss the charges. They argued coding should be protected as free speech under the First Amendment. In support of this motion, prominent cryptocurrency organizations like Coin Center, the Blockchain Association, and the DeFi Education Fund submitted amicus briefs last month.

Storm’s legal team argued that the statutes under which he was charged were unconstitutionally vague. They even claimed that the laws fail to clearly outline what actions are illegal. This lack of clarity, they said, made it unreasonable to expect someone would know if their actions were unlawful. The defense holds that merely writing and distributing software code aimed at enhancing financial transaction privacy should not be illegal.

Also, the defense asserts that Storm did not partake in money laundering or violate the International Emergency Economic Powers Act.

The motion also calls upon the “rule of lenity ”. This is a legal doctrine that says any ambiguity in law should be resolved in favor of the defendant. Storm’s lawyers argued that the broad interpretation of the laws by the prosecutors did not give fair warning of what was considered illegal. As a result, they argued, the charges should be dismissed.

DoJ Rejects Roman Storm’s Dismissal Plea, Pushes Case to Jury Trial

Soon afterwards, the DoJ responded to Storm’s request . They said that the defense’s motion contained disputed facts that should be go before a jury.

US authorities claim that organizations such as North Korea’s Lazarus Group have used Tornado Cash to launder illicit funds. In their defense, Storm’s legal team argued Tornado Cash did not function as a custodial mixing service. Therefore, they claimed, it should not be classified as a “financial institution”. They also maintained Storm had no control over the service or the ability to prevent groups like Lazarus from utilizing it.

A representative from the DeFi Education Fund expressed disappointment with the outcome of Alexey Pertsev’s case in the Netherlands but emphasized that it should not influence the US proceedings against Storm.

 

The indictment suggests software developers who create open-source, general-use software could face criminal charges if bad actors misuse that software years later, without any direct or active involvement from the developers themselves. The spokesperson emphasized that this interpretation does not align with current US law.

Roman Semenov Charged on Allegations of Neglecting Cybercrime Warnings.

According to  the DoJ, despite receiving complaints and appeals from victims of cybercrimes, the executives, including Semenov, intentionally refrained from introducing measures that could prevent criminals from using their platform to launder ill-gotten cryptocurrencies.

In a related action, the Treasury’s Office of Foreign Assets Control (OFAC) has issued sanctions  against Semenov, following a similar action taken against Tornado Cash last year.

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