In continuation of the Tornado’s case versus the United States, the jury has reached a verdict. This could see co-founder and developer Roman Storm imprisoned or granted freedom. Crypto players, especially privacy developers, await the verdict in arguably one of the most followed cases in the ecosystem since the Ripple versus SEC case.
The verdict could have a broader impact on digital privacy and regulatory precedent. So, what has the Jury said regarding the future of Roman Storm and his highly controversial protocol, Tornado Cash?
What Does the Jury Say
The verdict, as established by the Inner City Press, reads as follows: guilty of conspiracy to operate an unlicensed money transmitting business. The jury was convinced that Storm participated in money-transmitting services without the appropriate license. The jurors, however, admit that he didn’t control the user funds. This charge, according to the federal transmitter laws, attracts a penalty of a maximum sentence of five years.
Another verdict was given on money laundering. The jurors couldn’t reach a unanimous verdict on conspiracy to commit money laundering and conspiracy to violate North Korea sanctions. The prosecuting counsel, led by U.S. Attorney Jay Clayton, had earlier indicated that Tornado Cash facilitated the laundering of more than $1 billion, with some funds tied to the dangerous North Korea Lazarus Group.
In Storm’s defence, the team emphasized that Tornado Cash is an open-source tool that, once deployed, can’t be altered. They argue that Tornado Cash is like Bitcoin or Web protocols, and that criminal use doesn’t make the owner or developer guilty.
Roman Storm Was Caught Up in the First Place for KYC Functionality
Roman Storm was charged alongside his co-defendants, Roman Semenov and Tom Schmidt, founder of Dragonfly Capital, for allegedly laundering money for the Lazarus Group through the privacy protocol Tornado Cash. Court documents revealed internal emails in which the Dragonfly Capital general partners discussed integrating KYC functionality into Tornado amid compliance issues. The DOJ believes Schmidt’s actions are liable to prosecution, suggesting that he was well aware of the legal risks.
Storm’s defense requested that Schmidt testify to provide clarity around those communications. However, the Dragonfly general partner pleaded the Fifth Amendment right, a request which the prosecution declined. Prosecutor Thane Rehn confirmed that Schmidt and his employees are being considered for charges, though it wasn’t specified.
Now, Roman Storm faces some serious charges, although the most severe didn’t hold, which excites the crypto community. Amanda Tuminelli of the DeFi Education Fund reacted to the jury’s verdict, voicing that developers shouldn’t be held accountable for others’ misuse of their code.
Implications of the Jury’s Verdict
The verdict could set a precedent. It may persuade prosecutors to launch a manhunt for developers of other neutral and privacy tools. Section 1960 of United States law, used for the transmission charge, will be applied to other protocols, potentially killing any innovation in that aspect. The conviction may prevent other developers from coming up with technologies similar to Tornado Cash.
But, the good news is that the 1960 law didn’t clearly distinguish between custodial and non-custodial systems. Therefore, legislators may come up with clearer rules for who is responsible for illicit use – the developer or the user.
What’s Next for Roman Storm? Sentencing or Release?
Roman Storm will be convicted on the transmission charges, scheduled in the coming weeks, with a possible five-year prison sentence. However, the prosecutors may retry Storm on the money laundering and conspiracy to violate North Korea sanctions counts. The DOJ will evaluate its chances of securing a conviction before taking that crucial step.
Storm’s partial conviction marks a pivotal moment for the crypto space. His guilty verdict on operating an unlicensed money transmitting business sets a dangerous precedent that may kill innovation in the decentralized space. However, it also shows that privacy developers must express much more caution and act according to the available legal frameworks.
