‘This is a lot,’ judge says as Tornado Cash developer Roman Storm’s case is unclear

Tornado Cash developer Roman Storm and the Department of Justice faced off in court on Thursday to argue over whether a previous money transmitting conviction should be thrown out.

On Thursday, in a U.S. District Court for the Southern District of New York courtroom in Manhattan, Judge Katherine Polk Failla heard from both sides, particularly in areas around whether Storm should have blocked transactions or shut down Tornado Cash when he knew that bad actors were using it to launder money and evade sanctions.

Failla told the parties not to read too much into her questions, adding that if she had made up her mind already, there wouldn’t have been a hearing on Thursday.

“This is a lot,” Failla said toward the end of the hearing, adding that she would sit with the arguments.

In August, Storm was found guilty on a money transmitting charge, but the jury could not come to a conclusion on a money laundering charge and another related to sanctions. Tornado Cash is a decentralized crypto mixing service designed to provide privacy for its users, and prosecutors say it was used by criminals and sanctioned organizations.

Since the verdict, crypto advocates have rallied behind Storm to get an appeal. Storm’s case began during the Biden administration. During the Trump administration, a statement was made by Matthew J Galeotti, acting assistant attorney general of the Justice Department’s Criminal Division, where he said “writing code” is not a crime.

Lawmakers down in Washington are working on adding provisions in a broader market structure bill to protect developers and clarify that non-custodial developers are not money transmitters.

In March, prosecutors asked for a retrial later this year to resolve the two other charges — the ones related to sanctions and money laundering.

What was Storm liable for?

On Thursday, the government’s lawyer argued that Storm made improvements and updates to Tornado Cash, which they say helped criminals launder funds, and in turn also made him profitable.

The judge at one point asked if there could be a comparison drawn to Windows, which makes updates, but that improvements can be beneficial for both good and bad actors.

Meanwhile, Storm’s lawyers continually argued that creating a crypto mixing service is not illegal and said Storm did not build Tornado Cash to be used to break the law. They argued that if the technology is legal, then upgrades should be able to be made because it’s used by more than just criminals.

At a separate point, the government lawyer also drew an audible gasp from some in the courtroom after he suggested funds that were mixed with criminal funds as part of the mixing service could also be held liable.

A few of the participants felt he was bridging to assume that users of crypto mixers didn’t have a legitimate reason to want to use privacy-preserving protocols, “which is absurd,” someone in the courtroom told The Block.

Throughout the hearing, Storm propped his head up in his palm, listening to the arguments.

Amanda Tuminelli, chief legal officer at the DeFi Education Fund, who sat at the hearing, said that the government does not understand the underlying technology.

“The lack of nuance, the misrepresentations about how a UI [user interface] functions, and the equivocation between different technologies is really disheartening at this point in the case,” she said in a statement.

At the end of the hearing, Failla floated the next dates for a hearing, which Tuminelli said she sees as leaning toward a retrial.

“It was good to see the judge digging in and asking detailed questions, but there is no way to predict how she will rule on Storm’s motion,” Tuminelli said. “Given that she was focused on dates for the retrial at the end of the hearing, I think we can expect to see the case continue.”

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