The legal battle surrounding Tornado Cash has intensified. The U.S. Department of Justice (DOJ) pushed back against motions to dismiss filed by co-founders Roman Semenov and Roman Storm. The DOJ’s response to the motion to dismiss is not surprising. They assert that Tornado Cash’s operations extend beyond mere code to a full-fledged commercial enterprise involving money transmission without requisite controls.
DOJ’s Stance on Tornado Cash’s Motion to Dismiss
In recent legal filings, the DOJ argued that the dismissal requests by Tornado Cash founders were premature, citing the complexity of the case and the need for a jury to evaluate the disputed facts.
The filings focus on the founders’ roles in creating and maintaining Tornado Cash, a crypto-mixing service allegedly used by entities like North Korea’s Lazarus Group to launder funds. The service, according to the DOJ, included a website, user interface, smart contracts, and a network of relayers, all contributing to its operation as an unlicensed money transmitter.
The DOJ has contested the characterization of Tornado Cash merely as a non-custodial platform, highlighting the operational control exerted by the founders over the service’s relayer network and smart contracts, which they argue fits within the broader definition of money transmitting under U.S. law.
Technical Inaccuracies and Privacy Concerns
Amanda Tuminelli, legal chief at the DeFi Education Fund, criticized the DOJ’s arguments as technically inaccurate and dismissive of privacy concerns. She highlighted misinterpretations by the DOJ regarding the nature of decentralized applications and smart contracts, suggesting a lack of understanding of the underlying technology.
Furthermore, observers and legal experts have voiced concerns that the DOJ’s broad interpretation of money transmission could set troubling precedents for the crypto industry and internet freedom more generally. The implication is that any service facilitating the transfer of funds, regardless of direct control over those funds, could be deemed a money transmitter, potentially imposing onerous regulatory burdens on a wide range of internet and financial services.
The case against Tornado Cash is a seminal moment for cryptocurrency regulation. Crypto-focused lawyer Gabriel Shapiro pointed out that the focus might shift to the specifics of how Tornado Cash’s relayers operated. If that occurs, he believes the speficis of how blockchain transactions occur could play a critical role in determining the case’s outcome.
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