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The recent legal actions against Roman Storm, Roman Semenov, and Alexey Pertsev, the brains behind the cryptocurrency mixer Tornado Cash, are causing a ripple of concern throughout the cryptocurrency community. Last week, Storm was arrested and later released on bail, while Semenov faces indictment. Pertsev is up for trial in The Netherlands.
This flurry of activity has led some to wonder if federal agencies aim to discourage the use of privacy tools in cryptocurrency transactions. But it's not that simple. The U.S. Department of Justice (DOJ) alleges that the trio designed a platform that assisted in laundering up to $1 billion in digital currencies. Even more significantly, the platform reportedly aided North Korea’s Lazarus Group in moving "hundreds of millions" in cryptocurrency, which led to last year’s sanctions.
The developers of Tornado Cash aren't just battling allegations of aiding and abetting financial malfeasance. They are also accused of conspiring to operate an unlicensed money services business and violating the International Emergency Economic Powers Act by breaking sanctions agreements.
Anand Sithian, a former financial crimes prosecutor, described the allegations as "serious." According to Sithian, proving that the accused agreed to commit the alleged crimes would be the government's primary focus during the trial.
There's another twist: Tornado Cash’s native token, TORN. The indictment suggests the founders intended to financially benefit from the operations of Tornado Cash by manipulating the value of the TORN token.
However, the industry group Coin Center argues that the developers were only responsible for the software and not its misuse, following the guidelines set by the Financial Crimes Enforcement Network (FinCEN). Thus, they should not be treated as money transmitters.
As the case against Tornado Cash unfolds, it's clear that it will raise important questions about the extent to which developers can be held accountable for how their platforms are used, especially in the controversial area of crypto and privacy.
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