Stakes Elevated: Suspended Charges vs. Jailable Offenses

Storm, indicted by a grand jury in 2023 on money laundering and sanctions violation charges pertinent to Tornado Cash, faces a criminal indictment—a classification starkly different from the civil SEC enforcement actions that have targeted several high-profile crypto figures, including Sam Bankman-Fried.

Although Storm maintains Tornado Cash was not intentionally used by sanctioned entities, the government asserts streaming billions derived from illicit activities through the privacy-preserving mixer, with alleged ties to North Korean hacking groups like Lazarus.

Story initially published July 7.

A Surprising Legal Momentum for Privacy Advocates

Against this backdrop, federal courts have demonstrated an unexpected openness to Storm’s arguments, alongside those championed by the broader cryptocurrency privacy rights movement and the backing of allies including Coinbase and the Ethereum Foundation.

The core contention: that the U.S. government is attempting to prosecute software code itself, a philosophical and legally novel position rejected by ethical standards bodies whose rulings mirror this stance.

Consider: Alexey Pertsev, another Tornado Cash developer convicted in May 2024 in the Netherlands on similar charges, received a five-year sentence despite arguing that smart contracts dictated transactional behaviors beyond his individual culpability.

* denotes information current at the time of initial publication.

Shifting Sentiment: A Major Defeat for Civil Government Claims

However, a subsequent October 2023 ruling by the U.S. Court of Appeals dramatically reversed course. In what privacy advocates termed an “incredible win” stemming from a separate Ethereum Foundation case, the court determined that sanctions law applies to individuals and entities (“people and companies”), not software protocols alone.

This pivotal decision effectively invalidated the Treasury Department’s 2022 sanctions imposing a global trade ban on Tornado Cash.

In direct response, Treasury lifted the Tornado Cash sanctions in March this year, citing the emergence of “novel legal and policy issues” through technological evolution.

Meanwhile: Broader Crypto Industry Developments

Elsewhere in the breaking news sphere:

• Offshore firms brace for legal action: A July ruling permitted Celsius Network to proceed with its $4 billion lawsuit against Tether, one legal expert suggesting this may normalize legal actions by U.S. entities against foreign-based crypto firms.

• Polymarket’s predictive accuracy continues: The Ethereum-based prediction market platform maintains its reputation for forecasting outcomes with notable precision.

Post of the Week: Arthur Hayes on Stablecoins and Sovereignty

Crypto investor and former BitMEX founder Arthur Hayes, weighing in on recent U.S. congressional passage of a record-breaking budget deficit bill, issued his assessment this past week:

“The stablecoin Trojan horse is already inside the fortress. This isn’t DeFi or financial freedom. It’s debt monetization dressed in Ethereum drag,” Hayes wrote.

The post promptly retweeted by numerous crypto figures.

Trial looms as pivotal test for cryptocurrency’s legal standing

Following Treasury’s March decision and the Justice Department’s March memo signaling a pause in charging protocols themselves (yet continuing to pursue user misuse), Storm’s failure to face any consequences from these developments compounds the anomaly of his situation.

Should Storm be convicted, a maximum sentence of 20 years under the money laundering statute is possible. Storm’s case now represents a stark contrast to the government’s stated policy reversal yet delivered in reality.