Venture capital firm Paradigm has filed an amicus brief in support of Tornado Cash co-founder Roman Storm, urging the court to provide clear jury instructions regarding the definition of operating a money-transmitting business. This intervention highlights concerns about the potential impact on software development and innovation within the crypto and broader tech sectors.
Paradigm's Amicus Brief
Paradigm's amicus brief, filed on June 13 in a New York District court, emphasizes the necessity for the jury to fully comprehend the legal definition of a money-transmitting business. The firm argues that for Storm to be found guilty, the prosecution must unequivocally prove he knowingly operated such a business.
Key elements for proving a money-transmitting business include charging fees, knowingly transmitting funds on behalf of the public, handling specific criminal proceeds, and having custody or control over the funds.
Software Developers Versus Money Transmitters
Paradigm's Chief Legal Officer Katie Biber and General Counsel Gina Moon assert that the prosecution's argument is inconsistent with existing law, FinCEN guidance, and decades of case law. They contend that software development, particularly for non-custodial protocols like Tornado Cash, does not constitute the acceptance and transmission of value.
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In 2014, the US Treasury Department under former President Obama determined that software development did not involve the acceptance and transmission of value.
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A 2019 finding by the department indicated that total independent control over users' crypto was a crucial factor in determining if an intermediary is a money transmitter.
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Tornado Cash is a non-custodial crypto mixing protocol, meaning its developers never held or controlled user funds.
Implications for Innovation
Paradigm warns that a guilty verdict for Roman Storm could have severe repercussions for innovation in the crypto and fintech industries. The firm argues that allowing such charges to proceed risks empowering unelected prosecutors to redefine criminal statutes, potentially leading to the imprisonment of individuals who adhere to widely accepted regulatory guidance.
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The case could set a precedent where software developers are held liable for how their products are used, extending beyond crypto to open-source, AI, and other technology communities.
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Paradigm likens this scenario to prosecuting a television manufacturer for the sharing of state secrets or Apple for conspiracies formed through iPhone conversations, highlighting the absurdity of holding developers responsible for user actions.
Background of the Case
Roman Storm and fellow co-founder Roman Semenov were charged in August 2023 with helping to launder over $1 billion in crypto through Tornado Cash. The trial is anticipated to commence on July 14. A charge of conspiracy to operate an unlicensed money transmitting business was dropped on May 15, following a Department of Justice memo stating that the agency would not prosecute crypto mixers for users' activities.
Sources
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Paradigm urges jury clarity in Roman Storm’s Tornado Cash case, PANews.
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Paradigm Files Amicus Brief Supporting Roman Storm, Cointelegraph.
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