Roman Storm’s Tornado Cash Conviction Sparks Debate Over Developer Liability

Introduction

On August 6, 2025, a Manhattan jury convicted Tornado Cash co-founder Roman Storm of operating an unlicensed money-transmitting business, carrying a potential five-year sentence. The jury deadlocked on more severe charges of money laundering and sanctions violations, leaving open the possibility of a retrial. The verdict has alarmed the crypto community, with industry groups like the Blockchain Association and Solana Policy Institute warning it sets a “dangerous precedent” for open-source developers. Critics argue that holding developers liable for non-custodial, decentralized protocols like Tornado Cash misapplies financial regulations and threatens innovation. The case highlights ongoing tensions between privacy-focused crypto tools and U.S. regulatory frameworks, with implications for decentralized finance (DeFi) globally.

Key Points

• Conviction and Charges: Storm was found guilty under 18 U.S.C. § 1960 for running an unlicensed money-transmitting business. The jury could not reach a consensus on conspiracy to commit money laundering or violate U.S. sanctions tied to North Korea’s Lazarus Group, prompting a partial mistrial.

• Tornado Cash Overview: Launched in 2019, Tornado Cash is a non-custodial crypto mixer that obscures blockchain transaction origins, attracting both privacy advocates and illicit actors like the Lazarus Group, which allegedly laundered $500 million from the Axie Infinity hack. The U.S. Treasury sanctioned the protocol in 2022 but lifted the designation in March 2025 after legal challenges.

• Industry Reaction: The Blockchain Association called the verdict a misapplication of money transmitter laws, arguing that Tornado Cash’s non-custodial nature means developers lack control over user funds. The Solana Policy Institute warned of criminal liability for immutable smart contract developers, citing a “fundamental misunderstanding” of decentralized tech.

• Legal Arguments: Prosecutors claimed Storm knowingly facilitated criminal activity, citing his ability to modify Tornado Cash’s user interface and alleging profits from illicit use. The defense argued that Storm merely wrote open-source code, protected as free speech, and lacked control over the decentralized protocol.

• Support and Next Steps: The Ethereum Foundation pledged to match $500,000 in donations for Storm’s legal defense, with over $3 million raised, including contributions from Vitalik Buterin. Industry groups advocate for the CLARITY Act to define DeFi regulations, and Storm’s team plans to appeal the conviction.

Critical Analysis

The article frames Storm’s conviction as a pivotal moment for DeFi and developer liability, but its implications and the underlying legal reasoning require deeper scrutiny:

• Misapplication of Money Transmitter Laws: The conviction hinges on classifying Tornado Cash as a money-transmitting business under the Bank Secrecy Act, despite its non-custodial nature. The Blockchain Association’s amicus brief notes that users, not developers, control funds in Tornado Cash, challenging the applicability of Section 1960. This ruling contrasts with 2019 FinCEN guidance, which exempts anonymizing software developers from money transmitter status, suggesting a judicial overreach that could criminalize neutral code creation.

• Prosecution’s Narrative: Prosecutors’ claim that Storm profited from criminal use and failed to implement Anti-Money Laundering (AML) measures oversimplifies decentralized systems. Tornado Cash’s smart contracts became immutable by May 2020, limiting developer control. The focus on the user interface as evidence of “control” ignores the distinction between front-end access and protocol operation, a nuance the article underplays.

• Precedent for Developers: The verdict’s potential to hold developers liable for third-party misuse of open-source code is a significant concern. The Solana Policy Institute’s argument that this misunderstands decentralized tech is compelling, as immutable protocols lack the custodial control typical of traditional financial services. This could deter innovation, particularly for privacy tools, as developers face legal risks for user actions. Comparatively, the Samourai Wallet founders’ guilty plea in July 2025 for similar charges reinforces this trend, signaling a broader regulatory crackdown on mixers.

• Regulatory Context: The article omits the broader U.S. policy shift under the Trump administration, which has favored crypto through actions like the Blanche Memo, discouraging regulatory charges without clear criminal intent. This inconsistency—prosecuting Storm despite a lighter regulatory stance—suggests selective enforcement, possibly driven by Tornado Cash’s association with high-profile hacks. The lifting of OFAC sanctions in March 2025 further weakens the sanctions violation charge, yet prosecutors may retry it, prolonging uncertainty.

• Global Implications: The article briefly mentions Alexey Pertsev’s Dutch conviction but understates its parallel to Storm’s case. Both cases reflect a global push to hold developers accountable for decentralized tools, with the Netherlands’ 64-month sentence for Pertsev setting a harsh precedent. The article also overlooks Asia’s regulatory crackdowns, like the Philippines’ exchange bans and India’s scam investigations, which align with this trend of tightening control over crypto privacy tools.

• Community Support: The Ethereum Foundation’s $500,000 pledge and Vitalik Buterin’s backing highlight the crypto community’s view of Storm’s case as a fight for privacy and innovation. However, the article doesn’t address potential biases, such as Buterin’s role in inspiring Tornado Cash’s creation, which could frame his support as self-interested.

Supporting Data

• Legal Details: Storm’s conviction carries a maximum five-year sentence; sentencing is pending. The DOJ may retry the deadlocked charges (money laundering: up to 25 years; sanctions violations: up to 20 years).

• Tornado Cash Usage: Prosecutors allege $1 billion in illicit transactions, including $500 million by Lazarus Group. The defense claims Storm was unaware of criminal use until after sanctions.

• Industry Support: Storm’s legal fund raised $1.96 million by July 2025, with additional $500,000 matched by the Ethereum Foundation.

• Regulatory Context: The Fifth Circuit’s 2025 ruling in Van Loon v. Department of the Treasury deemed Tornado Cash’s smart contracts non-sanctionable, supporting the defense’s decentralization argument.

• Market Context: Privacy-focused protocols like Tornado Cash face increased scrutiny, with global regulators targeting mixers after high-profile hacks (e.g., WazirX’s $235 million loss in July 2025).

Conclusion

Roman Storm’s conviction for operating an unlicensed money-transmitting business raises critical questions about developer liability in DeFi. While the jury’s deadlock on money laundering and sanctions charges offers hope for an appeal, the verdict risks chilling open-source development by holding coders accountable for user actions. The case reflects a broader global trend of regulating privacy tools, seen in Asia’s crackdowns and Pertsev’s Dutch conviction. Industry calls for the CLARITY Act and DOJ policy shifts under Trump may mitigate future prosecutions, but Storm’s fight—and its $3 million+ defense fund—underscores the crypto community’s resolve to protect innovation. The outcome of a potential appeal or retrial will shape the future of decentralized privacy protocols.