Alexey Pertsev, the developer behind Tornado Cash, has been convicted of money laundering by a Dutch court, following an indictment that accused him of engaging in money laundering activities between July 9, 2019, and August 10, 2022. The prosecution argued that Pertsev should have been suspicious about the illicit origins of transactions on the Tornado Cash platform. This decision has raised concerns in the crypto community, as Pertsev only developed an open-source tool and comparing his conviction to condemning a knife or car manufacturer whose users behaved in a wrong way.
Pertsev was arrested in 2022 when Tornado Cash was blacklisted by the U.S. government, with the U.S. Treasury accusing it of being a crucial tool for the North Korean hacking group Lazarus. This group has been linked to major crypto thefts, including a $625 million hack. The outcome of Pertsev’s trial could have implications for pending trials of other Tornado Cash developers, such as Roman Storm and Roman Semenov, who are facing allegations of money laundering and sanctions violations in the United States. Storm is set to stand trial in September, while Semenov has not yet been apprehended.
Storm challenged the charges against him, submitting a motion to dismiss all three charges, claiming he did not operate a money laundering business and did not violate the International Emergency Economic Powers Act. His attorneys argued that Tornado Cash is not a custodial mixing service and does not meet the definition of a “financial institution.” The defense maintained that merely developing the code for the project does not equate to operating a money laundering entity, and Storm had no control over the service. However, the US Department of Justice rejected Storm’s motion, stating that the service was announced in 2019 as a mixer and comprised a website, user interface, smart contracts, and a network of “relayers.”
The US Treasury has added Tornado Cash to its Specially Designated Nationals list, effectively banning Americans from using the mixer. Storm has been arrested after Tornado Cash was again added to the U.S. sanctions watchlist but is not accused of being directly responsible for laundering $1.2 billion. Despite Storm’s attempts to dismiss the charges against him, the DOJ rejected his motion, emphasizing that his self-serving version of his intent and contested view of how Tornado Cash operated were not grounds for dismissal. It will be crucial to see how Pertsev’s conviction and the pending trials of Storm and Semenov unfold, as they could have significant implications for the regulatory environment surrounding crypto and decentralized finance more broadly.
