Tornado Cash Founder Denies $1B Laundering Charges Linking to Lazarus
Key Insights
- Roman Storm, the founder of Tornado Cash, has pleaded not guilty to several charges.
- The US government alleges that Tornado Cash was used to launder about $1 billion for the North Korean Lazarus Group.
- A group of plaintiffs is suing the US Treasury in 2023, alleging that the sanctions violate the First Amendment.
- Tornado Cash's defence is that it is "merely a tool" and is not responsible for how it is used.
The crypto industry is no stranger to scams, lawsuits and money laundering charges.
How Do You Plead?
Roman Storm, who was arrested in August for charges related to money laundering and others, has pleaded not guilty before a U.S. District Court in the Southern District of New York, according to a Sept. 6 thread on X (previously Twitter) from Inner City Press.
According to the charges, Storm is facing charges of conspiring to commit money laundering, violating sanctions imposed by the US government and running an unregistered money-transfer company with his accomplice, Roman Semenov.
Tornado Cash, according to the prosecution's claims in court, was used to launder about $1 billion in illegal earnings for the North Korean Lazarus Group.
After his initial arrest in August, Storm was freed on a $2 million bail. He is now under house arrest and is now primarily prohibited from leaving select areas of New York, New Jersey, Washington, and California.
And a trial will happen a while from now, on 30 November.
Groups Oppose Tornado Sanction, Sue US Treasury
The Office of Foreign Assets Control (OFAC) initially sanctioned Tornado Cash in August 2022 and stopped all customer operations ever since.
The US treasury also joined in, alleging the mixer's involvement with money laundering for cybercriminals.
And at the time, an organization called Coin Center in Washington, sued the US Treasury in October 2022, alleging that Tornado Cash is "essential" for preserving their right to privacy.
However, the Treasury is now being sued in 2023 by a group of plaintiffs with support from Coinbase.
The plaintiffs in the lawsuit, are claiming that the United States' sanctions on Tornado Cash "exceed the department's authority", violated the First Amendment and infringed upon the right to free speech.
Tornado Cash Is Merely A Tool – Not Responsible For Users
According to sources, the Tornado cash attorney defended the motion, saying that
"We think the US government got it wrong"
As it stands, the prosecution argues that even after Tornado Cash became aware of the North Korean hacker group's activities, Roman Storm and Tornado Cash kept the service going.
However, Tornado Cash's defence is that the service is "merely a tool", and is not responsible for how it is used.
Ethereum Founder, Buterin, Co-Authors Paper On Tornado Cash Alternative
Co-founder of Ethereum (ETH), Vitalik Buterin, has contributed to a paper that examines the creation of Privacy Pools, as an alternative to Tornado Cash.
According to its abstract, these privacy pools will be an improvement on current privacy systems like Tornado Cash while while allowing financial privacy and regulation to co-exist.
Buterin has mentioned that he hopes that privacy pools might be the future, allowing Ethereum nodes to "literally run on a phone", and reducing the challenges Tornado Cash and the others are currently facing.
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