Roman Storm Judge Grants Delay of Tornado Cash Trial

A three-hour hearing today at the Thurgood Marshall Courthouse in lower Manhattan previewed the deep legal and even philosophical questions at the heart of the upcomung trial of Roman Storm, co-founder of the Ethereum-based cryptocurrency mixing service Tornado Cash. Storm has been charged with criminal money laundering for creating and managing the service, despite its decentralized nature, and the lack of any communication between Storm and allegedly criminal users.

Judge Katherine Polk Failla granted a defense request to delay Storm's criminal trial. The trial, originally scheduled for September of this year, will be delayed until early December. The defense and government prosecutors also presented oral arguments around several related motions.

Those other motions encompassed defense requests for enhanced document discovery ahead of Storm’s trial; disputes over prosecutors’ warrant authority to access cryptocurrency belonging to Storm; and a defense motion to summarily dismiss the trial, on the alleged grounds that the government prosecutors’ own description of Storm’s activities do not rise to the level of criminal liability.

Judge Failla will issue rulings on those motions at a later date. The judge made clear that setting a new trial date should not be taken as an indication of how she will rule on the defense’s motion to dismiss. Storm’s team had sought a continuance until January of 2025 on grounds that they needed time to review evidence. In the hearing, however, Judge Failla framed her decision as necessary to give herself enough time to consider the legal issues raised by the defense’s motions.

The oral arguments presented by each side previewed what are likely to be highly charged legal questions at the heart of the trial – questions with huge implications for how the law is applied to decentralized technology.

Most significant is the defense’s motion to dismiss the charges against Storm before a trial begins. Defense attorney Keri Axel reiterated the defense's claims that money laundering charges against Storm were legally flawed for several reasons. Axel argued that Storm did not enter into any agreement with the criminal entities that laundered stolen funds through the Tornado Cash service; did not establish Tornado Cash with criminal intent; and did not at any time have control of user funds.

Axel further argued that Tornado Cash’s smart contracts were immutable by May of 2020, but alleged money laundering by North Korean hackers took place in September 2020, undermining “the government’s allegation of an agreement … [towards] an unlawful object.” That is, Tornado Cash could not have engaged in a conspiracy to launder North Korean funds, because its creators had no influence over the service after that May.

Government prosecutors attempted to rebut these claims by arguing that Storm and his cofounders maintained many parts of the Tornado Cash service in addition to its smart contracts, including its front-end user interface. Prosecutors further argued that Storm and co. were aware their service was being used by criminals; and that they profited from that activity while taking no action to stop those activities. Judge Failla expressed seemingly sincere concern that this could establish mere negligence as a sufficient standard for criminal money laundering charges.

The government team was led in the hearing by Assistant U.S. Attorney Thane Rehn, notably part of the team that successfully prosecuted Sam Bankman-Fried in 2023.

Oral arguments were also presented regarding a defense request to compel the discovery of communications between U.S. investigators and their Dutch counterparts, known as MLAT documents, for the Treaty on Mutual Legal Assistance in Criminal Matters. These documents would have been related to the Dutch investigation of Storm’s cofounder, Alexey Pertsev, who was convicted of related charges by a Dutch court. Government prosecutors pushed back, arguing that the defense had only speculative arguments that the MLAT documents might contain information useful for their case, and further that MLAT documents, as communications between the U.S. and a foreign government, could be too diplomatically sensitive to release.

Finally, defense and prosecutors sparred over a pre-emptive defense motion to suppress any evidence discovered using private keys accessed in a search of Storm’s residence. Investigators have sought to access on-chain crypto wallets belonging to Storm, for the purpose of uncovering evidence that he profited from the Tornado Cash service through the sale of its TORN token. The defense sought to eliminate language that seemed to allow the government to seize “any and all” crypto in Storm’s possession for evidentiary purposes, even though Storm had signficant funds that were not derived from Tornado Cash.

In a preview of what is likely to be a trial full of semantic wrangling, the defense argued that a search warrant for a residence did not extend to on-chain crypto wallets, even if private keys to those wallets were discovered in a warranted search, because the tokens themselves are “on” the blockchain rather than “in” a hardware wallet. Axel opined that government prosecutors have made a consistent habit of describing crypto wallets as “containing” tokens.

“Our position is that they can’t search the wallets,” Axel argued for the defense. “They’re using a passcode to seize your assets, that’s beyond the scope of a premises search.”

For those worried that convicting Storm could amount to prior restraint on software development or an expansion of the definition of money laundering, the hearing closed out with promising signs from Judge Failla. The Judge seemed to implicitly understand the autonomous and immutable nature of decentralized services, pointedly asking prosecutors “What should they [Tornado Cash founders] have done?” after learning that North Korean hackers were using their service.

The government argued that Storm and his team had the power to block withdrawals from Tornado Cash, and should have done so in the case of North Korea. Rehn further reiterated the argument that Storm had profited from these transactions and marketed Tornado Cash as a tool for criminals, helping “prove intent to participate in a conspiracy.”

Again showing a keen grasp of the key issues, Judge Failla asked whether the charges were comparable to criminally charging the creators of WhatsApp because criminals used it.

“If [Tornado Cash] has 1,000 customers and 1 is a bad actor, are they criminally liable?”

The defense articulated an even more sweeping critique of the charges, arguing that “the government [prosecutors] have stepped into a regulatory space.” Storm’s activities, which among other points did not involve a direct collaboration with the alleged criminals laundering funds, therefore do not constitute money laundering under current law, the defense argued.

Judge Failla will rule on the motions to compel discovery, restrict the search of Storm's crypto wallets, and to dismiss the charges, at a future date.

Independent journalism does not finance itself. If you enjoyed this article, please consider donating to our Geyser Fund.