Fears of the case being the start of a new assault on the industry may be overblown.
The Tornado Cash indictments are being viewed by many as another tipping point for crypto. In that view, how the case plays out could define how the federal government can deal with decentralized trading platforms if they’re seen as broad precedents. But the case may be much more straightforward than initial reactions suggested.
As far as the allegations themselves go, there are some facts that aren’t really great for the industry: the DOJ alleged that Storm and Semenov created a program and user interface that allowed for malicious actors to launder up to $1 billion in crypto – including North Korea’s Lazarus Group, which allegedly moved “hundreds of millions” through the mixer .
“Certainly, the government will want to prove the substantive charge, that he actually did these things, but did these two individuals come to a meeting of the minds as to the conduct that is alleged to violate these federal statutes? That is what the government is going to have to prove,” he said. “You've got to think about it sort of separate in your mind, the Tornado Cash smart contract from the user interface in the website, because I think that's exactly what the Department of Justice is doing,” he said.Tornado Cash’s native TORN token is another complicating factor, Sithian said. According to the indictment, the defendants used the token to profit off of the operation of Tornado Cash as a service.
“What [the DOJ has] done here is lay out a bunch of evidence to try to paint the picture that these guys weren't just in it for software or development, they just weren't good Samaritans here,” he said. “They were in this for money, and in fact, they were deceptive with their community about the money they were making [and] how they were profiting.”
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