No Acquittal For Storm Today
Will Roman Storm be freed? After a much anticipated hearing on the Tornado Cash developer’s motion for acquittal, we still don’t know.
The New York Southern District Court has yet to decide whether Roman Storm, one of the founders of Ethereum privacy tool Tornado Cash, deserves acquittal. Judge Katherine Polk Failla heard the arguments today but still has to make her decision – and respond to the government’s motion for a retrial.
Storm’s defence team filed the motion for acquittal under the Federal Rule of Criminal Procedure 29, or Rule 29, which allows a defendant to challenge the sufficiency of prosecution’s evidence either during the trial or 14 days after a guilty verdict. The evidence is considered legally insufficient if no rational juror could find guilt beyond a reasonable doubt even if they see the evidence in the light most favorable to the prosecution. A successful motion ends the case and leads to acquittal.
Last August, Storm was found guilty of conspiracy to operate an unlicensed money transmitting business. The two other – and more serious – charges, of conspiracy to commit money laundering and violate U.S. sanctions, left the jury deadlocked and resulted in a mistrial on those counts, which are still up for a retrial.
But the issue of unlicensed money transmission did not get much attention today – and neither did the defense’s appeals to the First Amendment. Storm’s defense had insisted that convicting Storm for writing open-source code could criminalize the development of decentralized software. During the pretrial hearings, Judge Failla disagreed with this interpretation, finding that "the functional capability of code is not speech within the meaning of the First Amendment” – much to the dismay of policy groups, who understand software as speech.
Today the judge did not pay much attention to the First Amendment argument again, briefly indicating that she was not going to discuss the constitutional issues.
In the over three hours of proceedings, the discussions rather focused on issues of venue and the definition of a criminal conspiracy.
L0la L33tz
SDNY, or not SDNY?
Was the Southern District of New York the proper venue for the trial? Neither Storm nor any of his co-founders are based in the city. This means the prosecution has to prove the district was where either the co-conspirators formed their agreement or “an overt act in furtherance of the conspiracy was committed by any of the conspirators,” the defense argued. At trial, both Judge Failla and the jury, too, had seemed unconvinced.
The choice of venue was explained by the government with several arguments: that a venture investor who funded the entity behind Tornado Cash, Peppersec, was located in New York, that a hacker who used Tornado Cash was located there, and that an attorney who contacted the Tornado Cash team on behalf of the hacked exchange Bitmart was also based in NYC.
The defense, in turn, argued that the VC funding of Tornado Cash was irrelevant. As for the hacker, he did not use Tornado Cash to launder the proceeds of his crimes – he used it to seed his Ethereum wallet before he performed his hack, Storm’s lawyers said.
The prosecution additionally alleged that Infura, an Ethereum cloud service used by Tornado Cash, used a Manhattan-based bank, which could be used to construe venue. But Peppersec’s payments to Infura could not be interpreted as acts to further a criminal conspiracy, Storm’s defense laid out:
First of all, ultimately, the payments were made either in cryptocurrency or in fiat to another, Buffalo-based bank account. More importantly, the user interface is not equal to the protocol itself, the lawyers argued.
“Isn’t that the main way users accessed Tornado Cash?” Justice Failla asked. “The UI is not an essential component, it did not transfer funds,” Storm’s lawyer Brian Klein responded. On X, CEO of the DeFi Education Fund Amanda Tuminelli expressed frustrations with the government’s apparent lack of an understanding of the technology in question.
David Z. Morris
All Funds are Criminal – Even the Ones that Aren’t
Next up was a lengthy discussion on what constitutes an overt act in furtherance of a conspiracy. The prosecution argued that as soon as Storm knew malicious actors were using his service, basically anything he and his colleagues did to keep the project running and enhance it amounted to knowingly helping criminals.
Judge Failla and U.S. Attorney Ben Arad went back and forth discussing whether the government believes that just keeping the service afloat – for any users to utilize, not only criminals – was a crime.
Arad responded that Storm could have made the service “less hospitable” for criminals but chose to make it better instead. “He wanted all of that money, not just the finds of innocent users,” he said, adding that at the very least, Storm could have walked away from the service he created as soon as he realized criminals were using it.
In pre-trial proceedings, the question whether Storm had done enough to stop criminals from using his service came up multiple times. While the developers had implemented a sanctions-oracle by the blockchain analysis firm Chainalysis, the prosecution had dismissed the addition as “window dressing”. Instead, Storm could have implemented a user registry, an expert witness testified at trial – despite the fact that Tornado Cash was not deemed a money service business, and therefore was under no obligation to implement KYC.
In a surprising turn, possibly a sign that the prosecution still does not believe private transactions can be legitimate, Arad also noted that the presence of criminal funds inside Tornado privacy pools “dirtied” the funds of innocent users as well, as they “helped conceal” the stolen crypto – a notion that caused some in the audience to gasp.
David Z. Morris
What Constitutes a Conspiracy?
Speaking about Tornado Cash founders’ work to enhance the privacy and usability of the service, the prosecution pointed at the introduction of a decentralized relayer network in March 2022 as proof Storm was willing to make the service better, even though he knew it was used by hackers.
Arad argued that the update enhanced anonymity for Tornado Cash users but also served to increase the profitability of Storm’s business, as it increased demand for the project’s TORN tokens.
The judge then asked whether the government was arguing that the improvements to the protocol were intended to help criminal activity by design, not only by unfortunate effect, and expressed doubt there was evidence for such an argument in the case.
In his closing remarks, Klein noted that Storm actually did not earn money from Tornado Cash, and all that the relayers registry did was make the tool more decentralized. He underscored the fact that crypto mixers are legal – hence making one better can not be a crime. Arad, in turn, reiterated the argument that the update enhanced Tornado Cash’s anonymity, which “was very helpful to criminals.”
Klein disagreed. Any technology created for legitimate purposes can be misused, and founders knowing about such misuse and still developing their products is not enough to accuse them of assisting criminals, Storm’s lawyers insisted.
To drive this point home, Keri Axel, part of Storm’s defense team, proceeded to mention a Prohibition era case in which a sugar vendor sold sugar to an illegal distillery knowing they made alcohol – however, that did not make the sugar seller a co-conspirator unless they had a stake in the illegal operation. Similarly, Storm did not have any stake or interest in criminal operations, she stated.
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