Venture capital firm Paradigm has filed an amicus brief in support of Tornado Cash co-founder Roman Storm, arguing the jury needs to be properly briefed on the law’s definition of what operating a money-transmitting business involves.
Jury needs the full context of the law
In its amicus brief, filed in a New York District court on June 13, Paradigm argues that the court must ensure the jury understands that for Storm to be found guilty, the prosecution must prove he was knowingly operating a money-transmitting business.
This includes charging fees, knowingly transmitting funds on behalf of the public, knowingly handling the specific proceeds alleged to be criminal, and having custody or control of the funds being transmitted or transferred.
An amicus brief is filed by a party not directly involved in a court case but has an interest in the outcome and hopes to provide the court with advice or another perspective.
Tornado Cash is a non-custodial crypto mixing protocol; the developers never hold or control the funds. The New York US Attorney’s Office argues that Storm conspired to run the crypto mixing service as an unlicensed money transmitter.
Software developers are not money transmitters
Katie Biber, Paradigm’s chief legal officer, and Gina Moon, the firm’s general counsel, said in a blog post on Tuesday that the prosecution’s argument is “contrary to the plain text of the law, clear FinCEN guidance, and decades of case law.”
Biber and Moon argue that under former President Obama, the US Treasury Department found in 2014 that software development didn’t constitute an acceptance and transmission of value.
They also argued that in 2019, the department found that total independent control over users’ crypto was a factor in determining if an intermediary is a money transmitter.
“Allowing this charge to persist risks letting unelected prosecutors change the plain meaning of criminal statutes–and threaten everyday citizens with imprisonment even if they are following widely-disseminated and accepted regulatory guidance,” they said.
The US charged Roman Storm and fellow co-founder Roman Semenov in August 2023, accusing them of helping launder over $1 billion in crypto through Tornado Cash.
A guilty verdict could also hurt innovation
Biber and Moon said the “stakes of this matter are high” because if Storm is found guilty, it could hobble the innovation and software development in crypto and fintech.
At the same time, they said it could have ripple effects on the broader open source, AI and technology communities because software developers could be held liable for how their products are used.
Related: Ethereum Foundation pledges $500K to Roman Storm’s defense
“This is as absurd as prosecuting a television manufacturer for the sharing of state secrets on-air, leather wallet craftsmen for wallets holding stolen cash, or Apple for conspiracies formed through iPhone conversations,” Biber and Moon said.
The trial is expected to begin on July 14. A conspiracy to operate an unlicensed money transmitting business charge was dropped on May 15 after the Department of Justice released an April memo that said the agency wouldn’t prosecute crypto mixers like Tornado Cash for users’ activities.
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