Roman Storm Re-Petitions Court To Compel FinCEN Communications

The defense for Tornado Cash developer Roman Storm is re-petitioning the court to compel the Government to produce communications between FinCEN and prosecutors, stating that "the government, at a minimum, misled this Court with regard to the scope of Section 1960 under relevant FinCEN guidance". The court had previously denied Storm's motion to compel, as the Government argued that FinCEN was not material to his prosecution.

The petition follows revelations in the criminal case against Samourai Wallet developers, in which it was disclosed that the Southern District of New York (SDNY) had consulted with the regulator on bringing criminal charges for violations of money service business registration requirements against the developers, highlighting that senior FinCEN staff were not of the impression that Samourai Wallet developers needed a money service business license.

"The disclosures in the Samourai case reveal that the government, at the very least, played fast and loose and, at worst, affirmatively misled this Court, with its arguments about FinCEN guidance when responding to the motions to dismiss and to compel discovery," Storm's motion states, requesting "an order from this Court requiring the government to: [...] conduct a thorough Brady review for any information suggesting that Tornado Cash would not qualify as a “money transmitting business,” including any communications with FinCEN, and promptly produce them; [...] produce the disclosures made in the Samourai case that are referenced in the recent filings (as well as any other related Brady materials that may have been produced in discovery to the defense there); and [...] provide the date this prosecution team learned of the information in those disclosures."

The Fox Guarding The Hen House

"Throughout this case, a central point of contention has been whether Tornado Cash is a money transmitting business and the implications of that characterization for liability," the defense argues, noting that FinCEN is often consulted before bringing unlicensed money transmitting charges, while highlighting that "FinCEN provides assistance during the course of a prosecution, including by providing a FinCEN representative to testify at trial."

The motion further highlights that prosecutors have conceded to have consulted with FinCEN prior to bringing charges against Storm, but refused to hand over the content of said communications, arguing that "FinCEN was not part of the prosecution team and thus not subject to the discovery obligations," leading the court to deny Storm's previous motion to compel.

According to Storm's defense, the Government's argumentation that the previously withheld conversations with FinCEN in the case against Samourai Wallet developers are not exculpatory evidence are baseless.

"To the extent the government is questioning the reliability or weight of the exculpatory information," the motion states, “it [is] the prerogative of the defendant and his counsel—and not of the prosecution—to exercise judgment in determining whether the defendant should make use of it, because [t]o allow otherwise would be to appoint the fox as henhouse guard."

FinCEN Opinion Affects Money Laundering Charges

Noting that the Department of Justice has since agreed to drop parts of the unlicensed money transmission charges against Storm, the defense argues that this does not alleviate the Goverment's obligation to hand over exculpatory evidence as it additionally affects the money laundering charges against Storm:

"If Tornado Cash was not a money transmitting business because it lacked control, it equally undermines the government’s claim that it had an obligation (or the ability) to implement KYC procedures."

Additionally, the defense argues that the Government misled the court to deny Storm's previous motion to dismiss, claiming that its charges were consistent with Section 1960 violations as well as FinCEN's published guidance on virtual currencies.

"The government’s own words demonstrate the significance of the FinCEN officials’ communication: namely, that it undermines the government’s characterization of the relevant FinCEN guidance promulgated in 2019, which characterization this Court adopted in ruling on Mr. Storm’s motion to dismiss," the motion states, criticizing that the court had adopted the Government's argumentation that control over funds was not a necessary requirement to be charged with money service business registration violations according to FinCEN.

"Contrary to what the government argued in its opposition, the communication demonstrates that FinCEN does believe that control is required for a cryptocurrency mixing service to be a money transmitting business. Moreover, the government likely knew at the time it submitted its opposition that FinCEN officials had stated their view that a cryptocurrency mixing service would “NOT” (all caps in original) be a money transmitting business in the absence of control."

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