Why Tornado Cash’s Roman Storm verdict marks ‘a sad day for DeFi’

Key Takeaways 

Roman Storm was found guilty of running Tornado Cash as an unlicensed money transmitter. Crypto legal experts argue the verdict should be appealed, noting that Storm never controlled user funds.

A jury found Roman Storm, founder of the privacy-focused crypto mixer Tornado Cash, guilty of operating an unlicensed money-transmitting business.

The Department of Justice (DoJ) stated that Storm and his co-founders were able to cash out over $12 million in profits. 

Most of this gain was from over $1 billion of illicit money transfers by North Korean hackers, per the DoJ. 

Jay Clayton, the U.S. Attorney for the Southern District of New York (SDNY), praised the conviction and warned that, 

“The speed, efficiency, and functionality of stablecoins and other digital assets offer great promise, but that promise cannot be an excuse for criminality.”

A sad day for DeFi?

North Korean hackers used Tornado Cash to launder the bulk of stolen crypto, including $600 million from Axie Infinity.

Storm was arrested in August 2023 and slapped with three criminal charges: operating an unlicensed money transmitter, money laundering, and sanctions violations. 

After a four-week trial, the jury found him guilty of running an unlicensed money transmitter, fetching a five year sentence.

Reacting to the update, Variant Fund’s legal chief, Jake Chervinsky, stated it was a ‘sad day for DeFi’ and the DoJ could retry the other charges. 

However, the DoJ shouldn’t have brought the unlicensed money transmitter charges under Section 1960, because Storm didn’t control user funds, noted Chervinsky. 

“Section 1960 should not apply to the developer of a non-custodial protocol who lacks control of user funds. This case should go up on appeal.”

He called the verdict a terrible outcome for Storm and the crypto industry and urged President Donald Trump to block the Department of Justice from retrying the two unresolved charges.

Coin Center, a crypto advocacy group, also urged Roman to appeal the ruling, adding that it will support him. 

Another advocacy group, DeFi Education Fund, echoed a similar stance, stating that,

“We are disappointed that the jury did not recognize that Storm should not be responsible for the actions of third parties he could not control.”