US Prosecutors Reject Tornado Cash Co-Founder‘s Argument for Dismissal

Why It Matters

The decision signals that developers of privacy‑enhancing blockchain software may face direct criminal exposure, reshaping risk assessments across the crypto industry.

Key Takeaways

• SDNY rejects Storm's copyright defense argument
• Jury deadlocked on money‑laundering and sanctions charges
• Case highlights developer liability for blockchain tools
• Potential retrial could add up to 40 years imprisonment
• DOJ leadership shift may affect crypto prosecution policy

Pulse Analysis

The U.S. Attorney for the Southern District of New York, Jay Clayton, has dismissed Roman Storm’s attempt to lean on a recent Supreme Court copyright ruling as a shield against criminal charges. Storm, a co‑founder of the privacy‑enhancing mixer Tornado Cash, was previously convicted of running an unlicensed money‑transmitting operation, while a jury could not agree on the money‑laundering and sanctions counts. Clayton’s filing emphasizes that the alleged misuse of Tornado Cash was “window dressing,” and he urges the court to schedule a retrial that could expose Storm to up to 40 years in prison.

The defense’s reliance on *Cox Communications v. Sony Music* underscores a growing strategy to equate code distribution with civil copyright infringement, a line prosecutors say does not hold in criminal money‑laundering contexts. In *Cox*, liability hinged on direct infringement, whereas Tornado Cash’s anonymizing protocol can be weaponized to obscure illicit transfers. By rejecting the analogy, the SDNY signals that open‑source developers may face heightened scrutiny when their tools lack built‑in anti‑money‑laundering safeguards. This stance could force the blockchain community to embed compliance features or risk criminal exposure for contributors.

The broader policy environment adds another layer of uncertainty. Acting Attorney General Todd Blanche, who recently authored a memo urging an end to “regulation by prosecution,” has yet to clarify how his office will treat cases like Storm’s. While Blanche’s memo stops short of guaranteeing immunity, it signals a possible shift toward selective enforcement, especially for platforms that merely provide infrastructure. Industry observers will watch whether the DOJ’s internal debate translates into fewer prosecutions or a more nuanced approach that balances law‑enforcement goals with innovation incentives in the rapidly evolving crypto sector.