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Venture Capital Firm Paradigm Files Amicus Brief for Tornado Cash Founder
In a significant intervention in the Tornado Cash case, venture capital firm Paradigm has filed an amicus curiae brief in support of co-founder Roman Storm. Filed June 13 in U.S. District Court, New York, the brief argues the court must explicitly instruct the jury on the legal requirements for operating a money-transmitting business.
A Time for Full Context
Paradigm contends the jury must fully understand that for Storm to be convicted of the conspiracy charge (which was later dropped), the prosecution bears the burden of proving “that Roman Storm knowingly operated a money-transmitting business”.
Specifically, the firm argues the government must prove Storm was involved in:
- Charging fees
- Knowingly transmitting funds on behalf of the public
- Knowingly handling the specific proceeds alleged to be criminal
- Having custody or control of the funds being transmitted or transferred
An amicus brief (Latin for “friend of the court”) is typically filed by a party not directly involved in the case but with a strong interest in its outcome.
The Core Argument: Developers vs. Transmitters
Tornado Cash is a non-custodial, open-source cryptocurrency mixer protocol. Critically, its developers never hold or control the funds processed through its smart contracts.
The core of Paradigm’s argument was delivered in a June 12 blog post by Katie Biber, Chief Legal Officer, and Gina Moon, General Counsel:
“Our blog post explains why we believe the jury needs clarity on the specific legal elements of the definition [of an unlicensed money transmitter] before rendering a verdict,” the firm stated.
They further asserted the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has provided clear guidance that designing smart contracts **does not** constitute “accepting or transmitting monetary instruments.” This principle was affirmed in a 2014 advisory issued under the Obama administration.
Reinforcing their position, Paradigm highlighted a 2019 FinCEN notice that indicated “total independent control over users’ funds” is a necessary element for determining if an intermediary acts as a money transmitter.
Paradigm added:
“Allowing this charge to proceed risks enabling unelected prosecutors to supplant the plain meaning of well-established criminal statutes and, in doing so, gamble with the liberty of everyday citizens even when adhering to prevailing and widely disseminated regulatory interpretations.”
Broader Implications for Innovation
The tempest surrounding the Storm trial extends beyond his individual fate. Paradigm emphasized how a guilty verdict could significantly dampen innovation within the cryptocurrency and fintech ecosystems.
Moreover, it risks broader chilling effects on the open-source and AI development communities:
“A conviction could have detrimental effects on the innovation occurring within the cryptocurrency and financial technology community as well as the broader open source and AI communities… This is as nonsensical as prosecuting a television broadcaster for broadcasting state secrets, a leather craftsman for manufacturing wallets containing illicit cash, or Apple for hosting illicit conversations on iPhones,” stated Biber and Moon.
Roman Storm and Tornado Cash co-founder Roman Semenov were charged in August 2023 with conspiring to operate an unlicensed money transmitting business via Tornado Cash. The current trial began July 14.
Related: Tornado Cash’s Roman Semenov faces retrial after charges dropped in first trial
Interestingly, a conspiracy charge against Storm was dismissed on May 15. This followed an April memo released by the Department of Justice stating the agency would not prosecute developers of tools like Tornado Cash based on users’ applications, aligning with Paradigm’s argument regarding the lack of operator control over funds.
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