Tornado Cash Co-founder Faces Trial Complication Following IRS Testimony Over Alleged Tether Laundering
ROMAN STORM, the co-founder of Tornado Cash, encountered a significant procedural obstacle Wednesday when a federal judge permitted IRS Special Agent Stephan George to testify about links between Georgia resident Hanfeng Lin’s allegedly stolen cryptocurrency and the privacy-focused protocol.
During direct examination, George conceded that the approximately $250,000 Lin lost in a “pig butchering” scam in 2021 could have never been deposited directly into Tornado Cash. The agent admitted that while the mix may have been a destination, the stolen funds likely passed through a series of wallets before any potential final deposit.
Nevertheless, George testified that a portion—specifically 47,000 Lin’s Tether (USDT) tokens—eventually migrated through the system, directly contradicting prominent blockchain analysts who assert there is no evidence Lin’s crypto was ever on the platform.
Government Pivot as Doubts Emerge
Their case strategy shifted last weekend following online analyses by researchers Taylor Monahan and ZachXBT who argued against Tornado Cash being involved in the “Lady Dragon” heist. Initially, prosecutors sought to link Storm’s alleged early sales of Tornado Cash tokens to the increased government pressure on the protocol.
Defense attorneys previously requested that Agent George be barred from testifying on tracing methodologies, arguing his use of the “last in, first out” accounting method for tracking tokens was neither reliable nor standard practice in blockchain forensics.
Despite defense objections, the court permitted the testimony, contingent on its flaws being challenged during cross-examination.
During cross-examination, defense attorney Keri Axel highlighted George’s admission that using a different analytical method could yield a divergent conclusion, potentially exonerating Storm if Lin’s funds did not reach the mixer. Axel indicated the examination would extend into Thursday.
Protocol Control Explored in Testimony
In contrast, blockchain security expert Philip Werlau provided extensive testimony Wednesday focusing on Tornado Cash protocol control. Werlau explained that Storm and his co-founders likely held decisive influence over protocol modifications, even those requiring token-holder approval.
Werlau identified an alleged oversight: despite measures like restricting access from specific regions and blocking designated wallets (though circumvention possibilities were noted), the protocol’s core privacy function remained sophisticated regardless of transfer method.
The prosecution concluded its presenting case arguments Thursday morning, while defense readiness depends partly on an unpredictable factor: whether Storm himself chooses to testify. Without Storm’s testimony, the trial could conclude as soon as Monday.
