Tornado Cash Trial Could Raise Additional Questions Over Blockchain Surveillance Reliability

The jury trial against Tornado Cash developer Roman Storm, originally scheduled for April 14th, has been moved to July 14th. The parties had spent the past months debating pretrial disclosures, in which the Government attempted to petition Storm to effectively reveal his defense strategy, and Storm attempted to compel the Government to produce additional material potentially favorable to the developer's defense.

In October, Judge Failla ordered both Storm and the prosecution to disclose their expert witnesses statements ahead of trial on request of the Government, which the defense described as "unprecedented".

Under Federal Criminal Procedure Rule 16, the defense must only provide the prosecution with the names of expert witnesses and their statements ahead of trial if it has asked the prosecution to do the same. If the defense does not move the prosecution to disclose its expert witnesses, the defendant's expert witnesses may remain undisclosed too, or so the rule says.

To avert the disclosure, Storm previously filed an appeal with the Second Circuit, as well as with the United States Supreme Court.

Additionally, the Government had previously attempted to compel Storm to disclose privileged material relating to his defense. Judge Failla granted the Government's request in part in March, arguing that previous disclosures made by Storm were "insufficiently detailed", ordering the developer to produce "the names of the lawyers from whom Mr. Storm received legal advice [...], the subject matter of that advice; and [...] the timeframe in which Mr. Storm received the advice."

The court has additionally revised the following dates leading up to the trial:

July 8th for the final pretrial conference, June 30th for the exhibit and witness list, and June 25th for the production of the Government's witness material.

Arguments Over Chainalysis Attributions

The defense has had its issues with the disclosure of material provided by the Government as well. In February, Storm petitioned the court to order the Government to fully comply with its disclosure obligations, arguing that the prosecution may be withholding information.

Specifically, the defense sought the Government to disclose "any statement made by Chainalysis personnel in which they discuss any errors related to their analysis of Tornado Cash, and/or made statements that support any defense theories articulated in Mr. Storm’s various motions, and any and all work product in which the government has relied on Chainalysis for attribution of hacks to the DPRK," as well as "any statements made by Tornado Cash users, relayers, token holders, developers, or others connected to Tornado Cash in which the person denies they were engaged in a criminal conspiracy."

To charge Storm with conspiracy to violate sanctions, the Government is alleging that "a minimum of $1 Billion was laundered through Tornado Cash [...] for a host of cyber criminals, including a sanctioned cybercrime organization that used the service to launder hundreds of millions of dollars’ worth of cryptocurrency for North Korea’s weapons of mass destruction program."

In light of Chainalysis' recent wrongful attribution of over $300 Million to North Korea, the defense had asked the Government to disclose how it had reached such conclusions.

In turn, the Government argued that it "does not intend to rely on any Chainalysis analysis, work product, or attributions at trial, so the defendant’s request for Chainalysis work product should be denied." Additionally, the Government argues that it "has produced to the defense detailed expert disclosures that explain the cryptocurrency tracing it intends to present at trial, and that do not rely on Chainalysis or contain any reference to Chainalysis work product or analysis."

In March, Judge Failla ruled that material relating to Chainalysis was not "favorable to the defense and material to the defendant's guilt or punishment," as the defense requested this information following Chainalysis' correction of its wrongful attribution that occured "after the relevant period charged in this case," therefore the requested information was "neither relevant nor exculpatory."

The court has decided on June 4th and June 13th for jury selection and instructions as well as for motions in limine and Daubert motions, meaning evidence to be excluded from jury trial as well as exclusions under the Daubert standard, used to determine the scientific accuracy of expert witness testimonies.

It is unknown whether Storm may challenge the reliability of blockchain surveillance software used to attribute illicit funds to Tornado Cash under the Daubert standard, but determining the scientific accuracy of the blockchain surveillance analysis applied in Storm's case seems crucial to determining the accuracy of the charges brought against the developer.

In the criminal prosecution of alleged – and now convicted – Bitcoin Fog operator Roman Sterlingov, the defense had sought a similar strategy, as the Government had relied heavily on analysis conducted via Chainalysis software.

While the defense uncovered that the blockchain surveillance firm did not collect margins of error rates for its software, a prerequisite under the Daubert standard, the judge had effectively ruled that Chainalysis software was sufficiently reliable due to testimonies provided by the Government's expert witnesses.

Leo Schwartz of Fortune Magazine had called the judge's logic "circular".

Following Sterlingov's conviction, former Chainalysis CEO Michael Gronager had marketed Chainalysis software as "the only company in the world with a stamp of approval for our ability to look at a blockchain and create evidence.”

But the trouble around Chainalysis software continues. Last month, the firm was sued by debtors of bankrupt Celsius Network for allegedly misleading the public on a fraudulent audit of the platform for its own financial benefit.

Similar arguments had been made by Sterlingov's defense attorney Tor Ekeland, who claimed that the firm had a financial interest in convictions that utilized Chainalysis software, painting the use of Chainalysis data under expert testimony as potentially partial, describing the software as a "black box".

Chainalysis was additionally sued for defamation by the crypto project YieldNodes last year, as the firm had classified the project as the second largest scam in 2022 in its annual Crypto Crime Report without providing any evidence of its findings.

Chainalysis remains the largest US Government contractor for blockchain surveillance software with a total of $93.2 Million in awarded funds.

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