The
core
question
at
the
heart
of
the
U.S.
Department
of
Justice’s
case
against
Tornado
Cash
developer
Roman
Storm
is
whether
he
created
software
or
controlled
a
service.
Storm’s
attorneys
sparred
with
prosecutors
Friday
during
a
three-hour-long
hearing
on
his
motion
to
dismiss
the
government’s
case
against
him,
with
Judge
Katherine
Polk
Failla
of
the
Southern
District
of
New
York
questioning
both
teams
about
their
arguments
on
this
central
question.
The
DOJ
charged
Storm
–
and
fellow
developer
Roman
Semenov
–
with
conspiring
to
commit
money
laundering,
conspiring
to
operate
an
unlicensed
money
transmitting
business
and
conspiring
to
violate
the
International
Economic
Emergency
Powers
Act
(in
other
words,
conspiring
to
violate
sanctions
regulations)
last
August.
Storm
pleaded
not
guilty
to
the
charges
and
moved
to
dismiss
the
case
against
him
in
March.
Among
the
DOJ’s
charges
are
allegations
that
Storm
and
his
fellow
developers
knew
that
the
Democratic
People’s
Republic
of
Korea
(DPRK)
and
other
malicious
actors
were
laundering
funds
through
the
mixer,
which
prosecutors
described
as
a
business
offering
a
service.
The
defense
has
argued
that
Storm
merely
developed
privacy
software
for
financial
transactions
that
he
released
to
the
world
for
anyone
to
use.
In
Friday’s
hearing,
defense
attorney
Brian
Klein,
of
Waymaker
LLP,
argued
that
Storm
had
no
control
of
Tornado
Cash
after
May
2020
–
the
time
period
in
which
the
DOJ
alleged
Storm
broke
the
law
through
his
operating
the
decentralized
mixer.
Keri
Axel,
also
of
Waymaker,
added
that
Tornado
Cash’s
user
interface
did
not
in
itself
control
the
transactions
that
users
sent
around.
“They’re
not
connected
to
those
transactions,”
she
said,
later
adding,
“I
don’t
think
we’re
anywhere
close
to
wilfully
providing
service
to
the
DPRK.”
This
was
a
theme
during
the
hearing,
with
the
defense
repeatedly
emphasizing
that
Storm
didn’t
have
control
of
Tornado
Cash’s
pools,
which
were
immutable,
and
therefore
Storm
couldn’t
be
criminally
liable
for
how
people
used
the
mixer.
“This
is
the
only
[money
laundering]
case
ever
where
the
defendant
didn’t
have
control
over
the
funds.
Period,”
he
said.
Liability
and
control
Prosecutor
Thane
Rehn
argued
that
“any
legitimate
business”
that
becomes
aware
of
criminal
activity
is
required
to
take
steps
to
stop
it.
“That’s
a
lot.
I’m
not
sure
what
you
expected
Mr.
Storm
and
his
colleagues
to
do.
Should
they
have
shut
down
Tornado
Cash?”
Failla
asked
the
prosecution.
“How
do
you
saddle
him
with
liability?”
Failla
mused
on
what
the
tipping
point,
as
she
called
it,
should
be
for
when
a
service
should
shut
down
when
it
becomes
aware
that
criminals
are
using
it
in
the
process
of
bad
actions
Rehn
said
“a
single
transaction”
has
been
known
to
be
enough
evidence
–
Storm,
sitting
at
the
defense
table,
shook
his
head
at
this.
If
Storm
didn’t
make
a
profit,
would
he
have
been
prosecuted,
the
judge
asked.
No,
prosecutors
said,
there
would
still
be
a
case:
“We
could
imagine
a
philanthropic
money
launderer.”
WhatsApp
hypothetical
As
Failla
considered
arguments
about
whether
Storm
could
be
held
criminally
liable
for
activity
on
the
software
he
helped
to
create,
she
asked
prosecutors
whether
another
software
used
by
criminals
–
encrypted
messaging
application
WhatsApp
–
could
similarly
be
blamed
for
what
users
did
with
its
technology.
Because
WhatsApp
is
encrypted,
it
“must
know”
that
one
of
its
major
selling
points
is
that
criminals
can
use
it
without
their
communications
being
spied
on.
“I
don’t
see
you
charging
WhatsApp,”
Failla
said,
asking
prosecutors
what
the
difference
is
between
the
two
softwares
that
makes
one
liable
for
criminal
activity
and
another
not.
The
encryption,
Rehn
said,
means
that
WhatsApp
doesn’t
have
specific
knowledge
about
what’s
happening
and
can’t
separate
the
wheat
from
the
chaff
–
the
criminal
from
the
non-criminal
activity.
Failla
countered,
asking
Rehn
whether
that
would
change
if
the
Attorney
General
were
to
write
to
WhatsApp,
informing
them
that
criminals
were
using
it
to
evade
law
enforcement
–
surely
then,
she
asked,
WhatsApp
would
be
“on
notice”?
Rehn
ultimately
argued
that
activity
on
WhatsApp
–
communication
–
is
protected
by
the
First
Amendment,
whereas
it
is
“certainly
constitutional”
for
the
government
to
make
certain
requirements
of
financial
institutions.
Document
production
The
first
half
of
the
hearing
focused
on
two
other
defense
motions:
a
motion
to
compel
the
DOJ
to
produce
evidence
from
other
U.S.
government
agencies
and
foreign
governments,
and
a
motion
to
suppress
the
DOJ
from
seizing
certain
cryptocurrencies.
The
defense
wanted
the
DOJ
to
produce
documents
tied
to
mutual
legal
assistance
in
criminal
matters
treaties
(MLAT)
from
the
Dutch
government,
which
recently
prosecuted
a
third
Tornado
Cash
developer,
Alexey
Pertsev.
The
defense
also
wanted
the
DOJ
to
ask
the
U.S.
Treasury
Department’s
Office
of
Foreign
Asset
Control
(OFAC)
and
Financial
Crimes
Enforcement
Network
(FinCEN)
to
produce
any
material
they
might
have.
Klein
said
the
standard
for
the
MLAT
material
is
if
the
defense
has
a
“strong
sense”
that
the
material
may
be
helpful,
conceding
that
the
team
did
not
necessarily
know
if
the
communications
would
be
relevant.
“It
doesn’t
have
to
be
an
actual
exhibit,
just
something
that
can
help
us
uncover
[further
evidence],”
he
said.
The
DOJ
argued
that
communications
with
a
foreign
government
might
have
diplomatic
sensitivities,
and
couldn’t
be
shared.
“The
defense’s
request
is
entirely
speculative,”
said
prosecutor
Ben
Arad.
Klein
said
he
would
be
happy
with
redacted
documents
that
omitted
any
of
the
diplomatic
concerns.
He
also
asked
the
judge
if
she
could
review
the
materials
herself
if
she
was
inclined
to
refuse
the
defense
request.
The
DOJ
similarly
pushed
back
against
the
request
to
have
OFAC
and
FinCEN
turn
over
any
materials,
saying
those
agencies
are
not
part
of
the
prosecution.
The
judge
also
seemed
skeptical
of
the
defense
argument,
saying
the
request
seemed
to
want
her
to
order
an
end-round
against
existing
case
law,
which
protects
agencies
not
part
of
prosecutions.
Klein
said
the
DOJ
had
already
turned
over
a
FinCEN
report,
which
he
said
was
tied
to
the
request.
The
judge
did
not
make
any
decisions
on
Friday,
saying
she
would
rule
“promptly”
on
the
various
motions.
She
also
pushed
Storm’s
trial,
currently
scheduled
for
September,
to
Dec.
2.
Rehn
said
he
anticipated
a
roughly
two-week
trial.
While
Judge
Failla
did
not
indicate
how
she
would
rule,
she
seemed
open
to
arguments
from
both
parties.
“You
might
look
at
this
and
say
it’s
a
very
noble
message.
I
might
look
at
it
and
say
it’s
a
haven
for
criminals,”
Failla
said.
“And
we’d
both
be
right.”