The Roman Storm Tornado Cash Trial Explained

Tornado Cash founder Roman Storm is currently battling with the U.S. government in a heated courtroom trial to avoid decades in prison time. And unlike other high-profile crypto defendants, Storm has attracted a support from a powerful contingent, including the Ethereum Foundation and Ethereum co-founder Vitalik Buterin himself.

Raising more than $3 million dollars and counting, Storm and his defense team are putting up a serious fight as they now take over the floor to present to the jury their side of the case in the second half of the trial.

Coinage headed down to the New York courtroom this week to uncover what makes the trial of Roman Storm so unique — and why it's arguably the most important trial for crypto yet.

First off, this isn't a case centering on simple fraud for once. It's not as clear cut as the trial of FTX founder Sam Bankman-Fried, nor Celsius founder Alex Mashinsky — which prosecutors easily navigated to demonstrate to jurors those founders harmed customers. Instead, in the case of Roman Storm, the government is going after a crypto founder for the tool he built to let users protect their privacy on the blockchain.

Tornado Cash was a money mixer Storm and his co-founders launched in 2019. It allowed anyone to deposit crypto from a public address, pooled those assets, and then let users withdraw on the other end to a fresh wallet without anyone being able to trace whose funds were whose. Proponents said it restored much needed privacy for transactions onchain. Critics said it was a blatant money laundering tool.

That distinction might not matter if it’s just a few thousand users making small-time transactions in the low double-digit figures. But when North Korea’s elite hacking team the Lazarus Group started used Tornado Cash to launder some of the more than $600 million it stole in one of the largest crypto hacks of all-time? Yeah, the government started to care.

The reason for that is because the U.S. has a lot of rules around who you can do business with. Particularly for financial players, they typically follow these rules because the penalties of not doing so are extreme. Not only can fines be in the billions of dollars for banks who don’t block drug traffickers or other state-sanctioned actors, they could be supporting regimes the U.S. is actively working against.

Perhaps it’s no surprise then that the government brought this case against Storm, hitting him with a trio of charges — including conspiracy to commit money laundering, conspiracy to operate an unlicensed money transferring business, and conspiracy to violate the International Emergency Economic Powers Act (the law that makes it illegal to work with America’s sanctioned enemies like North Korea.)

But from a use case perspective, it’s hard to argue something like Tornado Cash isn’t needed to protect privacy onchain. Even your credit card transactions aren’t publicly broadcast to everyone around the world — and as crypto kidnappings continue to rise, it doesn’t really seem safe letting everyone know exactly how much wealth you’re sitting on.

It’s also why the idea for Tornado Cash came directly from Ethereum co-founder Vitalik Buterin himself. He and Storm chatted about the idea of privacy onchain at a conference in New York before Storm and his co-founders launched the project — and indeed since, Ethereum’s future roadmap has become chock-full with upcoming privacy features. Perhaps it’s obvious, then, why this case matters to so many in the Ethereum community.

The reason for that is not just privacy — but also the inner workings of how the U.S. government has gone about prosecuting this case. They are going after Storm for running an unlicensed money transferring business. But, importantly, Tornado Cash as a service never technically took direct custody of users’ funds. Their immutable smart contracts merely facilitated users to take these actions themselves, if they so chose.

But as a crypto journalist who has seen plenty of these defenses that lean heavily on a firm understanding of a narrow reading of the law and the technology at play, I’m not sure the crypto community should be so optimistic. That is, the government usually does a very good job of making someone look guilty — and they usually don’t pursue cases they think they will lose.

As I sat in the courtroom this week, I saw that playing out yet again. The prosecutors read through the same conversations they highlighted in their earlier indictment. They highlighted the purposefully unsuccessful attempts by Storm and his co-founders to block North Korea's sanctioned wallet from interacting with their website’s front end, only to leave access to the money mixing smart contract elsewhere completely wide open.

But that’s the thing about immutable smart contracts like Tornado Cash. Once built, it’s very hard to stop bad actors from using it. The government’s case is that Storm probably should have thought of those consequences before building Tornado Cash. Or, perhaps, should’ve definitely done more once he and his co-founders became aware that the overwhelming majority of activity on their tool had mostly become North Korea laundering stolen funds. But those in crypto are quick to point out that that is simply not how permissionless systems or smart contracts work.

Regardless, if Storm wins his case, the “privacy above all else” narrative may severely undermine America’s ability to enforce its financial leverage on bad actors and make enforcing sanctions nearly impossible.

It’s also why the question posed to Roman Storm by crypto journalist Eleanor Terrett on the Crypto in America podcast was such a good one. Terrett asked Storm before the trial began point blank: “Do you believe the right to privacy outweighs concerns about national security?”

Storm answered: “My personal beliefs I don’t think matter much at this point. I only believe that developers should freely write code without consequences for misusage by third parties.”

Currently Coinage Media is running an onchain DAO poll for members to have their voice heard on how they would rule in the case. As for the real trial, jurors could be asked to deliver a verdict as soon as this coming week as the trial wraps up in New York.

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