Intricacies of Intent: The Central Dilemma in Roman Storm’s Legal Battle

The pivotal question in the U.S. Department of Justice’s case against Tornado Cash developer Roman Storm revolves around whether he simply engineered software or exerted control over a service.

During a three-hour hearing on Friday, Storm’s legal team clashed with prosecutors regarding his motion to dismiss the case, with Judge Katherine Polk Failla of the Southern District of New York scrutinizing the arguments from both sides.

The DOJ has charged Storm, along with fellow developer Roman Semenov, with conspiring to commit money laundering, operating an unlicensed money transmitting business, and violating the International Emergency Economic Powers Act, i.e., breaching sanctions regulations. Storm, maintaining his innocence, sought to have the case dismissed in March.

The prosecution alleges that Storm and his colleagues were aware that the Democratic People’s Republic of Korea (DPRK) and other nefarious actors laundered funds through Tornado Cash, characterizing it as a service rather than mere software. The defense contends that Storm merely developed a privacy tool for financial transactions, available for anyone to utilize.

Defense attorney Brian Klein of Waymaker LLP asserted that Storm had no control over Tornado Cash post-May 2020, the period during which the DOJ alleges he engaged in illegal activities. Keri Axel, also from Waymaker, emphasized that Tornado Cash’s interface did not govern user transactions.

“They’re not linked to those transactions,” she explained, adding, “I don’t think we’re anywhere near willfully providing services to the DPRK.”

Read more: BitMEX Pleads Guilty to Violating the Bank Secrecy Act in Anti-Money Laundering Case

The defense consistently highlighted that Storm did not control Tornado Cash’s immutable pools, thus arguing that he couldn’t be held criminally accountable for the mixer’s use by others.

“This is the only money laundering case where the defendant didn’t control the funds. Period,” Klein stated.

Liability and Control

Prosecutor Thane Rehn argued that any legitimate business that becomes aware of criminal activity must take measures to halt it.

“That’s substantial. What did you expect Mr. Storm and his associates to do? Should they have ceased Tornado Cash’s operations?” Failla queried the prosecution. “How do you attribute liability to him?”

Failla pondered over the threshold at which a service should cease operations upon discovering its misuse by criminals. Rehn suggested that even “a single transaction” could serve as sufficient evidence—Storm shook his head at this claim.

Failla questioned if Storm’s prosecution would have been pursued had he not profited. Prosecutors confirmed that the case would persist regardless: “A philanthropic money launderer could be conceivable.”

WhatsApp Hypothetical

Failla, deliberating whether Storm could be held liable for activities conducted via his software, questioned if other software, like the encrypted messaging app WhatsApp, could similarly be culpable for its users’ actions. Since WhatsApp is encrypted, it presumably “knows” that criminals might use it to avoid surveillance.

“I don’t see you prosecuting WhatsApp,” Failla remarked, asking prosecutors to differentiate between the two platforms.

Rehn argued that WhatsApp’s encryption means it lacks specific knowledge about its users’ activities and thus can’t distinguish between lawful and unlawful actions. Failla countered, suggesting that if the Attorney General alerted WhatsApp about criminal use, the app would then be “on notice.”

Rehn maintained that communications on WhatsApp are protected by the First Amendment, whereas financial institutions can constitutionally be subjected to certain governmental requirements.

WhatsApp Hypothetical

The hearing’s first half also dealt with defense motions to compel the DOJ to produce evidence from other U.S. and foreign agencies and to prevent the DOJ from seizing specific cryptocurrencies.

The defense requested documents linked to mutual legal assistance treaties (MLAT) from the Dutch government, which recently prosecuted Tornado Cash developer Alexey Pertsev. They also sought materials from the U.S. Treasury’s OFAC and FinCEN.

Klein argued the necessity for MLAT materials, suggesting a “strong sense” of their potential relevance, even if not definitively known. The DOJ countered that such communications might involve diplomatic sensitivities and could not be disclosed.

Prosecutor Ben Arad described the defense’s request as speculative. Klein proposed redacted documents or judicial review if the judge was inclined to deny the request.

The DOJ also resisted turning over OFAC and FinCEN materials, noting these agencies’ non-involvement in the prosecution. The judge seemed skeptical, suggesting the request aimed to bypass existing case law protecting such agencies.

The judge did not issue immediate rulings, promising a prompt decision on the motions. Storm’s trial, initially set for September, was rescheduled to December 2, with an anticipated duration of two weeks.

Judge Failla appeared receptive to arguments from both sides, remarking, “You might view this as a noble message. I might see it as a haven for criminals. And we’d both be right.”