US Department of Justice Convicts Tornado Cash Founder Roman Storm of Unlicensed Money Transmission, Significantly Impacting DeFi Developers and Regulatory Frameworks
(Background: The US Department of Justice plans to prosecute Tornado Cash’s investor Dragonfly Capital)
(Context: Tornado Cash co-founder Roman Storm reiterates “open-source software is innocent,” with support from Vitalik: on-chain privacy is crucial)
On the 6th of August, Eastern Time, a Manhattan jury found Tornado Cash co-founder Roman Storm guilty of “conspiracy to operate an unlicensed money transfer business,” which could result in a maximum five-year prison sentence. This marks the first time that developers of decentralized protocols have been included under the same compliance framework as traditional remittance operators, attracting significant attention from the global cryptocurrency market.
Judgment Content and Legal Focus
Specifically, the jury was unable to reach a consensus on two more serious charges: “conspiracy to launder money” and “conspiracy to violate sanctions,” with legal expert Samson Enzer noting that this reflects the prosecution’s difficulty in proving that the developers had direct control over the protocol or the subjective intent to facilitate criminal activities.
Nevertheless, Tornado Cash’s provision of anonymous transaction services was deemed to have assisted in laundering over $1 billion, including funds from the North Korean hacking organization Lazarus Group. Consequently, the charge of “unlicensed money transmission” was upheld, indicating that the government can intervene in decentralized applications through existing remittance regulations. In the future, all programs offering mixing or privacy features may be required to comply with similar standards.
Community Response and Regulatory Calls
Following the ruling, the cryptocurrency community quickly expressed its views. The DeFi Education Fund criticized the outcome as “disappointing,” fearing that the case could create a chilling effect on developers. Coin Center and the Blockchain Association also urged the government to provide clear regulations rather than relying on “litigation-based regulation.”
According to cryptocurrency journalist Eleanor Terrett, Storm plans to contest the charges and appeal, labeling them as nonsense.
Just encountered @rstormsf outside the courtroom. I asked him how he felt. He spoke calmly but with a noticeable smile, saying: “This is a big win. The ‘1960’ charge is bullshit, and we will fight it all the way. You know how President Trump said ‘fight, fight, fight’? We will do the same.” He expressed relief at not being detained and mentioned his 5-year-old daughter as one of the reasons for his determination to contest the guilty charge. He stated that he would return to Seattle tomorrow.
Industry Prospects and Potential Ripple Effects
Some observers have drawn parallels to President Trump’s earlier pardon of Silk Road operator Ross Ulbricht, but it remains uncertain whether Storm could receive similar treatment.
The White House has recently indicated in a report that current anti-money laundering regulations need modernization to address the challenges posed by decentralized finance. With the resolution of the Storm case, global regulatory bodies will likely observe the US’s approach, potentially leading to tightened regulations.
For developers and investors, the legal costs and risks of operating privacy protocols in the US are rapidly increasing. Project teams may soon need to enhance compliance departments, implement geographical restrictions or KYC processes, or even shift to jurisdictions with looser regulations.
The ruling against Roman Storm has ushered decentralized privacy technology into a new scrutiny period. Balancing innovation and privacy demands against anti-money laundering and national security considerations remains unresolved. However, it is clear that the cryptocurrency industry has officially entered an era of “compliance-first,” where each product design and capital allocation will be reassessed within legal boundaries.
