The US Department of Justice is not investigating Dragonfly Ventures or any of its executives related to its 2020 investment in Tornado Cash, according to co-founder Haseeb Qureshi.

“The DOJ has now backtracked, directly correcting the record during Monday morning’s trial, to state the media reports that they were planning to bring charges against Dragonfly were inaccurate, and neither Dragonfly nor any of its principals are targets in their investigation.”

These statements were made during Monday’s ongoing trial concerning US sanctions against the decentralized Tornado Cash mixer. Qureshi shared these updates following his own Tuesday post on social media platform X.

Prosecutors during the trial confirmed the existence of inaccurate public reporting regarding the government’s stance, but emphasized their continued focus remains on the charges linked directly to the Tornado Cash developers and related network participants.

DOJ Hints at Dragonfly in Tornado Cash Case

The situation came to light after a significant escalation on Friday, when DOJ attorneys suggested a potential investigation into Dragonfly for its 2020 investment in PepperSec, the security firm behind Tornado Cash.

In a strongly worded response on X, Qureshi characterized the attorneys’ comments as “unprecedented” and a direct violation of standard DOJ policy, explicitly alleging such speculation violated the parties’ confidentiality agreement and imperiled Dragonfly’s ability to assist in any associated defense.

Qureshi defended the pivotal 2020 investment, highlighting:

• His firm’s “confidence in the importance of open-source privacy-preserving technology”
• Prior due diligence, including securing outside legal counsel
• Explicit assurances received that Tornado Cash’s operations were compliant with relevant regulations at that time

The Tornado Cash Sanctions Saga

Tornado Cash, an open-source tool offering crypto transaction anonymity, sparked controversy when the US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned it in 2022 amid allegations of facilitating money laundering, cybercrime, and posing a national security risk.

Crucially, the validity of these sanctions was subsequently overturned after Tornado Cash’s users initiated a civil action lawsuit against OFAC.

Charging Tornado Cash Developers

While the sanctions were declared unlawful, US prosecutors have not relinquished their case against the individuals connected to Tornado Cash.

Developers Roman Semenov and Roman Storm were indicted in August 2023 on money laundering and sanctions violation charges. Storm’s trial is currently underway, having entered its third week, and his legal costs have reached $3.9 million – prompting a public fundraising appeal for further financial support.

Video: Dragonfly Responds to DOJ Scrutiny