From Sanctions to Legal Trial: The Debate Over Privacy and Accountability in Tornado Cash
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From Sanctions to Legal Trial: The Debate Over Privacy and Accountability in Tornado Cash
The Tornado Cash case has long transcended the fate of individual developers; it is now defining boundaries for the entire decentralized finance industry.
Navigating Web3 tides with focused insightsAuthor: Huang Wenjing
Tornado Cash: Privacy Defender or Money Laundering Tool?
Tornado Cash, a decentralized mixing protocol operating on the Ethereum blockchain, was widely used for its strong privacy protection features—features that also made it a target for regulators.
In August 2022, the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) issued a sanctions order placing Tornado Cash on the Specially Designated Nationals (SDN) List, accusing it of facilitating money laundering, particularly by the North Korean hacker group Lazarus, which allegedly processed over $1 billion in illicit funds through the protocol. This marked the first time the U.S. government sanctioned an on-chain project, sending shockwaves through the entire cryptocurrency industry.
However, on March 21, 2025, the situation took a turn when the U.S. Treasury unexpectedly withdrew the sanctions, removing Tornado Cash and all associated addresses from the blacklist. This decision wasn't entirely surprising—back in November 2024, the U.S. Fifth Circuit Court of Appeals had already dealt the Treasury a blow, ruling that Tornado Cash’s core smart contracts did not meet the legal definition of "property," and that the sanctions exceeded regulatory authority.
Yet, lifting the sanctions does not mean the developers are fully cleared. Alexey Pertsev was sentenced by a Dutch court in May 2024 to five years and four months in prison on money laundering charges; meanwhile, Roman Storm in the United States remains entangled in legal proceedings.
The case has ignited a broader debate: should open-source code authors be held accountable for the misuse of their tools? The Solana Policy Institute provided $500,000 in funding for the legal defense of Storm and Pertsev, emphasizing that "writing code is not a crime." Ethereum co-founder Vitalik Buterin and others have also raised funds in support, reflecting the crypto community’s deep concern over this case.
Roman Storm: Charged with Money Laundering, Jury Deadlocked
In August 2023, Roman Storm was indicted by U.S. prosecutors on eight counts, including "money laundering," "violating sanctions," and "operating an unlicensed money transmitting business." His trial began on July 14, 2025, in Manhattan, New York. While the jury failed to reach a unanimous verdict on the charges of "money laundering" and "violating sanctions," resulting in those counts being dismissed or left undecided, Storm was convicted of "conspiracy to operate an unlicensed money transmitting business" and now faces up to five years in prison.
This verdict has sparked widespread discussion. Some argue that as a technology developer, Storm should enjoy freedom of speech and should not be held responsible for how his decentralized tool was misused. Others contend that even if Storm could not control every detail of the protocol’s use, he may still bear responsibility if he knew the tool was widely used for illegal activities and failed to take preventive measures.
Technology Is Not Guilty: The Boundary Between Law and Morality
The slogan "technology is not guilty" resonates strongly within open-source communities and among decentralization advocates. The logic is simple: tools are neutral—the guilt lies with those who use them.
In many countries, especially the United States, technology developers are often viewed as creators entitled to free speech protections. This implies that the code they write should not automatically incur liability for misuse. For example, under Section 230 of the Communications Decency Act, internet service providers are generally not held liable for user actions on their platforms. Although this provision primarily applies to online platforms, it offers a similar level of protection for developers of decentralized protocols, provided they do not directly engage in illegal conduct.
However, not all jurisdictions fully embrace this principle. In the Netherlands, for instance, Tornado Cash developer Alexey Pertsev was convicted on charges of aiding money laundering. Dutch courts ruled that open-source software developers could bear some responsibility for the misuse of their tools. This highlights differing legal interpretations and stances on technological accountability across judicial systems.
Establishing Money Laundering Charges
In the United States, money laundering charges are typically prosecuted under the Money Laundering Control Act. According to this law, money laundering involves transferring illicit funds through banks or other financial institutions to conceal, disguise, or legitimize illegal proceeds. Key elements of money laundering include the unlawful origin of the funds and transactions conducted to obscure their source.
The "Knowledge" Standard
Most legal jurisdictions require that the defendant "knew" the funds were derived from criminal activity—a subjective requirement for establishing intent in money laundering cases. If a defendant genuinely lacked knowledge of the illicit nature of the funds, they usually cannot be found to have the requisite intent. The U.S. follows this standard. However, in certain circumstances, even without direct evidence of "knowledge," liability may still arise if it can be proven that the defendant had reasonable suspicion or deliberately ignored red flags about the funds’ illegality.
For example, Section 1956 of the Money Laundering Control Act explicitly states that anyone who "knows or has reason to know" that a financial transaction involves illegal proceeds may be considered complicit in money laundering. This means that even absent clear proof of actual knowledge, courts may still find liability if there were obvious warning signs or willful blindness.
The "Knowledge" Question in the Tornado Cash Case
In the Tornado Cash case, whether the developers met the "knowledge" standard has become central to determining their liability for money laundering. Prosecutors allege that the developers "intentionally" created a tool enabling anonymous transfers, thereby facilitating money laundering. The defense counters that, as developers of a decentralized protocol, they neither controlled nor were aware of specific instances of misuse.
Courts may consider several factors in assessing whether the "knowledge" requirement is satisfied:
1. Purpose of the Tool: Tornado Cash, as an open-source, decentralized protocol, was theoretically designed to enhance user privacy rather than specifically enable money laundering. Yet, whether courts will accept that developers should have foreseen its potential for illegal use remains a key point of contention.
2. Public Information and Warnings: If developers or the community became aware of frequent misuse for illicit transactions but failed to issue warnings or implement safeguards, courts might infer that the developers possessed "knowledge" or acted with deliberate indifference.
3. Developer Conduct and Responsibility: Prosecutors may argue that if Tornado Cash developers were fully aware of the risks of misuse, or failed to impose necessary constraints or monitoring on the protocol’s anonymity features, they could be deemed to have "known" the tool would be used for money laundering.
These factors open up complex discussions about developer responsibility in the design of decentralized financial tools. While the original intent of such technologies may not be criminal, defining accountability after misuse occurs is clearly a nuanced and multi-layered challenge. As the case unfolds, the legal balancing act between innovation and compliance may shape the future trajectory of blockchain technology.
Conclusion: Who Bears the Cost of Innovation?
The Tornado Cash case extends far beyond the fate of individual developers—it is helping define the boundaries for the entire decentralized finance industry. If open-source code authors can be imprisoned due to users’ illegal actions, who will dare to innovate? Conversely, if anonymous tools are allowed to grow unchecked, won’t criminal activity become even more rampant?
This case could set a crucial precedent. Its outcome will not only determine Storm’s future but also establish a behavioral template for the entire crypto community. On the scale balancing privacy and compliance, how should technology, law, and society compromise? Perhaps, like blockchain itself, the answer is still awaiting consensus.
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