Lauran

What is it?#

Tornado Cash is a completely decentralized non-custodial protocol that breaks the on-chain association between senders and receivers on blockchains like Ethereum through smart contracts, achieving transaction privacy protection. Users can deposit ETH or other ERC-20 tokens into the Tornado Cash smart contract and then withdraw them at any time to any new address, making it impossible for external observers to associate the deposit and withdrawal addresses. Tornado Cash utilizes cryptographic techniques such as zero-knowledge proofs (zk-SNARKs) to ensure the security and anonymity of user funds, with all code being open source.

Who made it?#

1. Roman Storm

• Nationality/Background: Long-term resident in the U.S. and a U.S. citizen.
• Professional Experience: Blockchain developer, having worked at several cryptocurrency and blockchain companies, including Blockchain Labs and PepperSec.
• Role in Tornado Cash: Core developer and co-founder of Tornado Cash, responsible for protocol development, community governance, and other tasks.
• Legal Status: Arrested in the U.S. in 2023, facing multiple charges including money laundering and sanctions violations, with a maximum sentence of 45 years in prison. On July 14, 2025: Roman Storm officially appeared in court in New York, and the case entered the trial phase.

2. Roman Semenov

• Nationality/Background: Russian.
• Professional Experience: Blockchain developer, one of the co-founders of Tornado Cash.
• Role in Tornado Cash: Mainly responsible for protocol design, technical architecture, and community operations.
• Legal Status: Currently not under the control of U.S. law enforcement, as he has not been formally arrested overseas, but he also faces criminal charges in the U.S.

3. Alexey Pertsev

• Nationality/Background: Russian, long-term resident in the Netherlands.
• Professional Experience: Developer in the blockchain and security fields, having participated in multiple crypto projects.
• Role in Tornado Cash: One of the core developers of Tornado Cash, mainly responsible for smart contract development and security audits.
• Legal Status: Arrested in the Netherlands in 2022, in May 2024, a Dutch court found Alexey Pertsev guilty of money laundering and sentenced him to 64 months in prison. The court ruled that Tornado Cash failed to prevent criminals from using its platform for money laundering, and Pertsev, as a developer, should have been alert to illegal transactions on the platform. Pertsev held a preliminary hearing for his appeal in June 2025, where his legal team requested a more thorough investigation of the case and questioned the findings of the Dutch Financial Crimes Investigation Service (FIOD). The case will have further developments on October 2, 2025. During this period, he is under home confinement with electronic monitoring.

Team Revenue Sources

1. Developers may potentially gain economic benefits from token allocation;

2. Relayer fees exist and can be used for rewards or treasury purposes through governance mechanisms (if adopted).

3. Governance Token (TORN)

• Tornado Cash issued a governance token TORN, with part of the allocation going to developers, early contributors, and community members.
• TORN tokens can be traded on secondary markets, allowing developers and team members to profit from selling tokens.

Tornado Cash's token (TORN) allocation details

• Total Supply: The total issuance of TORN is 10,000,000 tokens, with distribution starting on December 18, 2020.

Allocation Features:

• Tokens for the team and early contributors have lock-up and linear unlocking mechanisms to prevent short-term selling.
• A higher proportion of community allocation emphasizes decentralized governance, but the team and contributors still hold a significant amount of tokens.

As of July 28, 2025, the market capitalization is $44.5 million, with each Torn valued at $11.68. The Torn tokens obtained by founding developers and early supporters in the initial allocation are valued at over $30 million.

Timeline of Prosecution#

Tornado Cash is the platform used by the North Korean hacker group Lazarus Group for the largest amount of money laundering. Since its launch in 2019, Tornado Cash has been used for money laundering totaling over $7 billion, with about 30% related to illegal activities. The Lazarus Group has drawn significant attention in the U.S. for two main reasons: first, they frequently use cryptocurrency tools for large-scale theft and money laundering, and second, these funds are suspected of being used to support North Korea's nuclear weapons and missile programs, posing a direct threat to U.S. national security and that of its allies.

Common tools used by the Lazarus Group for attacks and money laundering:

• Tornado Cash: A decentralized mixer on Ethereum, the Lazarus Group used Tornado Cash to launder hundreds of millions of dollars in crypto assets after several large thefts, including those from Axie Infinity Ronin Bridge and Harmony Bridge.
• Sinbad: A Bitcoin mixer identified by the U.S. Treasury as the main money laundering tool of the Lazarus Group, handling funds from hacks like Axie Infinity and Horizon Bridge.
• Railgun: A privacy protocol utilizing zk-SNARKs technology; in 2023, the FBI noted that the Lazarus Group used Railgun to launder stolen funds from Harmony.
• eXch: Another mixing protocol on Ethereum also used for money laundering.
• Wasabi Wallet and Samourai Wallet: Bitcoin privacy wallets that support CoinJoin and other mixing features, previously used by the Lazarus Group for mixing.
• Wallet Drainers: Various phishing and malware tools used to steal users' wallet assets.

While Wasabi Wallet, Samourai Wallet, and others have also been used for money laundering, their development teams sometimes cooperate with law enforcement (e.g., blocking blacklisted addresses, assisting investigations) or proactively take compliance measures, reducing the risk of prosecution. Tornado Cash, however, adheres to the principle of "complete decentralization and uncontrollability," making it a primary target for regulatory crackdowns. The U.S. government aims to use this case as a deterrent, promoting industry self-regulation and compliance, encouraging more projects to actively cooperate with regulations and implement KYC, blacklisting, and other measures.

The legal challenges faced by Tornado Cash actually stem from two paths: one is administrative sanctions from OFAC, and the other is criminal charges from the DOJ. These two paths represent the U.S. government's strategy to combat "decentralized anonymous services" from different angles: the legal actions against Tornado Cash developers are not just a single case but span both administrative and criminal levels: on one hand, sanctions initiated by OFAC under the Treasury Department, and on the other, criminal accountability pursued by the DOJ against the developers. The following expands on each.

• OFAC directly listed the Tornado Cash contracts on the sanctions list, citing national security concerns and its use by the North Korean hacker group Lazarus Group for money laundering;

• DOJ must prove through judicial procedures that the developers "subjectively knew, objectively had control, and committed criminal acts."

2022

• August: The U.S. Treasury (OFAC) first imposed sanctions on Tornado Cash, accusing it of being used for money laundering and evading sanctions.

2023

• October 10: The CrypToadz NFT auction incident involved anonymous transactions through Tornado Cash.

2024

• February 16: GoFundMe shut down crowdfunding related to Tornado Cash for violating terms of service, refunding all donations.
• June 8: The Orbit Chain hacker transferred $48 million into Tornado Cash.
• November 26: The U.S. Fifth Circuit Court of Appeals ruled that the U.S. Treasury's sanctions against Tornado Cash were illegal and exceeded its statutory authority.

2025

• March 21: The U.S. Treasury removed Tornado Cash from the sanctions list.
• April 29: A federal court in Texas ruled that the Treasury's sanctions against Tornado Cash were unlawful and could not be reimposed.
• June 14: The Ethereum Foundation pledged $500,000 to defend Tornado Cash developers.
• July 14: Roman Storm appeared in court in New York, facing money laundering and conspiracy charges.
• July 18: The fourth day of the Tornado Cash developer's criminal trial in New York began with FBI witness testimony.
• July 22: The judge allowed witnesses to testify that Tornado Cash could have been modified to prevent criminal use.
• July 24: Witnesses stated that Roman Storm had control over some funds, becoming a focal point of the trial.
• July 25: Ethereum core developer Preston Van Loon testified in defense of Roman Storm, and government witnesses concluded their evidence.
• August 6: The jury convicted on the charge of "operating an illegal money transmission", but could not reach a unanimous verdict on more serious charges such as money laundering and sanctions evasion.

The timeline outlines key nodes from sanctions to prosecution, and next, we delve into the core of the case—the three charges brought against Roman Storm by the prosecution.

Original indictment PDF

Charge 1: Should developers be held responsible for money laundering if they write code? — Conspiracy to Commit Money Laundering

Conspiracy to Commit Money Laundering
Legal Basis: 18 U.S.C. § 1956(h)

Roman Storm is accused of using Tornado Cash to assist in laundering over $1 billion in illegal funds, including proceeds from multiple hacking attacks by the North Korean Lazarus Group. The prosecution claims he knowingly continued to develop, operate, and maintain "substantial control" over the protocol despite being aware of the illegitimate source of the funds, failing to implement KYC or blacklist interceptions. The indictment cites chat records between Storm and co-founders, marketing materials, and GitHub submissions to prove his "knowledge and assistance in money laundering." A group chat from October 2020 shows Storm complaining, "We are being treated as criminals," to which Semenov responded, "Terrorists also use dollars"; the judge deemed this merely a "complaint." On the technical side, the prosecution called AnChain.AI investigator Philip Werlau to testify, stating that Storm theoretically could modify the contracts to prevent criminal use; the defense countered by calling cryptography expert Matt Edman, who pointed out that Tornado Cash is deployed on IPFS, making old versions undeletable, and that the team had attempted to add anti-money laundering features that could easily be circumvented.

Charge 2: Do DeFi protocols qualify as money services? — Operating an Unlicensed Money-Transmitting Business

Conspiracy to Operate an Unlicensed Money-Transmitting Business
Legal Basis: 18 U.S.C. § 1960(a), (b)

The prosecution asserts that the anonymous transfer services provided by Tornado Cash constitute "money transmission services." Storm and others did not register as MSBs with FinCEN or obtain state-level licenses, yet they provided users with asset holding and transfer services while charging protocol fees, constituting a federal felony of illegal operation.

Charge 3: Does interacting with sanctioned entities constitute a violation for developers? — Violating IEEPA

Conspiracy to Violate the International Emergency Economic Powers Act (IEEPA)
Legal Basis: 50 U.S.C. §§ 1701–1705

After Tornado Cash was listed on the OFAC sanctions list, the platform continued to operate and allowed sanctioned entities (such as the Lazarus Group) to use it. The indictment claims Storm was aware of this risk but failed to take effective technical or operational measures to restrict North Korean hackers, constituting a conspiracy violation of the IEEPA.

Core Defense Argument

Storm's lawyer emphasizes: Once the mainnet contracts are decentralized, developers have no backdoor or special privileges; even if upgrade capabilities were retained, they have been gradually removed under community governance, so Storm lacks "control" and cannot unilaterally shut down services.

However, between the decentralization and centralization of the crypto industry, countless projects float, striving toward decentralization while being pulled by the gravity of realization. Many DeFi projects initially retained some management authority (such as emergency upgrades and bug fixes) during the "decentralization" process, but the ultimate goal is complete decentralization. The founding team's management and control of the project in its early stages constitute the most controversial part of the Tornado Cash case and are a very typical operational model of DeFi projects.

Although the Tornado Cash case has not yet reached a final judgment, the lawsuit initiated by OFAC has prompted many privacy DeFi protocols to begin incorporating compliance into their designs. The on-chain landscape is no longer a wild frontier; the tentacles of the real world have arrived.

Judge and OFAC: Precedents and Rulings#

The legal challenges faced by Tornado Cash span two independent but related legal tracks: one is the U.S. Treasury's Office of Foreign Assets Control (OFAC) using administrative means to list relevant contracts or addresses on the SDN (sanctions) list based on national security/sanctions policy, thereby restricting financial and service interactions; the other is the Department of Justice (DOJ) bringing criminal charges against developers under federal criminal law (such as money laundering, illegal operation of money transmission, violations of export/sanctions-related criminal laws, etc.), and must prove the subjective and objective elements of the defendant under the criminal standard of "beyond a reasonable doubt" in court. It is important to emphasize that even if OFAC later withdraws or adjusts administrative sanctions, this only affects the legal status of administrative compliance and economic sanctions and does not automatically invalidate existing or ongoing criminal cases—the prosecution can still pursue charges based on criminal law facts, and the defense can use administrative judgments as factual or strategic defenses, but the two are legally separate procedures.

The indictment is handled by the U.S. Attorney's Office for the Southern District of New York (SDNY), led by Assistant U.S. Attorneys Thane Rehn and Benjamin A. Gianforti, with a team that also includes Ben Arad, Special Assistant U.S. Attorney Kevin Mosley, and others.

The two lead prosecutors have significant experience handling complex financial and crypto-related cases: Rehn has played important roles in major financial criminal cases like FTX, while Gianforti is known for securing convictions in multiple crypto fraud/Ponzi cases.

The case is investigated and supported by the SDNY's Illicit Finance and Money Laundering Unit, in conjunction with law enforcement agencies such as the FBI and IRS-CI. The prosecution emphasizes using on-chain trace analysis, internal communication records, and technical expert testimony as evidence to establish the argument that "the defendant was aware and had technical/operational control," which is the core logic they repeatedly present in court.

The presiding judge in this case is Katherine Failla of the U.S. District Court for the Southern District of New York (SDNY).

She is one of the most experienced federal judges in U.S. crypto cases:

• Current Position: Judge of the U.S. District Court for the Southern District of New York (SDNY)
• Nomination: Nominated by President Obama in 2012 and confirmed by the Senate in 2013
• Education: Dartmouth College, Harvard Law School
• Background: Previously practiced at Sullivan & Cromwell law firm, then joined the U.S. Department of Justice, focusing on financial crimes

SDNY is known as the "Wall Street Court," as it encompasses the New York Stock Exchange, major investment banks, and tech companies, and is the most frequently used district court in the U.S. for handling financial and cryptocurrency cases. Judge Failla has presided over several important crypto cases and has practical case experience regarding decentralized protocols, smart contracts, and regulatory boundaries.

Representative crypto cases she has handled include:

1. Uniswap Class Action Case (2023)

   • Plaintiffs accused Uniswap of being liable for fraudulent tokens on the platform
   • Failla ruled: The protocol is decentralized, and developers are not responsible for user behavior
   • She likened it to "blaming Gmail for letting you receive spam"—emphasizing platform neutrality

2. Coinbase vs. SEC (Procedural Phase)

   • Coinbase sought to dismiss the SEC's lawsuit for securities violations
   • Although Judge Failla did not fully support Coinbase, she demonstrated an understanding of the technical architecture of the crypto industry and questioned regulatory boundaries

This background indicates that she does not approach the Tornado Cash case from a regulatory authority standpoint but seeks to clarify the boundary between technical control and criminal liability.

Court Ruling: Is Storm "aware and capable but inactive"?

In July 2025, the Roman Storm case entered a critical trial phase. The defense attempted to limit the government's expert witness Werlau's testimony, particularly to prevent him from mentioning Tornado Cash's failure to implement KYC, AML, and other compliance mechanisms, arguing that these accusations were not formally charged and could mislead the jury.

The court partially accepted the defense's argument, explicitly prohibiting the expert witness from commenting on whether Tornado Cash violated compliance obligations. However, Judge Failla ruled that the expert witness could still testify about whether Storm was "aware, capable, but did not take action."

The specific allowed testimony content includes:

• Whether certain technical means to prevent illegal use were technically feasible at the time;
• Whether Storm should have been aware of these measures;
• Whether the defendant had previously implemented similar functions, proving his capability;
• The government claims these functions are "easy to implement and very simple."

The judge believed that this testimony directly relates to Storm's "subjective intent," which is significant for the jury's assessment of criminal liability.

Additionally, regarding the dispute over whether a "user registration contract" is feasible, the court held that as long as it is technically feasible, it can be included as testimony; whether it is commonly adopted in the industry is a "credibility issue" to be determined by the jury.

The core controversy of this case is a variation of a classic question:

"If you write a decentralized protocol and others use it for crime, do you have responsibility?"

The prosecution's strategy is to demonstrate through witnesses, technical analysis, chat records, and other evidence that Storm retained upgrade rights and actual control over early versions of Tornado Cash, he knew the protocol would be abused, had the ability to prevent it, but chose to allow it.

Judge Failla's ruling advances along this logic. She did not simply accept the defenses of "code is speech" or "protocol neutrality," but instead proposed a new judgment standard:

Is there a presence of the three elements: "awareness + control + inaction"?

This judgment standard will significantly influence future DeFi developers' considerations regarding contract permission design and DAO governance structures.

Support for the Tornado Cash Case

• The Ethereum Foundation donated $1.25 million for Pertsev's legal defense, clearly stating that "writing code is not a crime," and called on the community to continue donating.
• In June 2025, they pledged $500,000 to defend Tornado Cash developers.
• Blockchain investment firm Paradigm also donated $1.25 million for Pertsev's defense, emphasizing the case's impact on the future of decentralized technology.
• The Electronic Frontier Foundation (EFF) submitted an amicus brief for Pertsev, arguing that developers writing code is protected speech and opposing his conviction.
• The crypto community has spontaneously formed crowdfunding organizations like JusticeDAO to raise funds for Pertsev and Roman Storm's legal fees. By mid-2024, the related crowdfunding had raised over $2.3 million.

Other Situations

• Pertsev himself has repeatedly thanked the community for their support on social media, stating that his freedom is due to the donations from lawyers and the community, calling for continued attention and support for his legal struggle.