In 2025, many within the crypto sector celebrated the notable shift toward digital asset regulation, spurred by the return of U.S. President Donald Trump to office in January.
Politicians and industry executives applauded the removal of former SEC Chair Gary Gensler, welcomed the appointment of crypto-friendly regulators, and marked the end of numerous Biden-era investigations into leading crypto firms, viewing it as a sign of the decline of regulation by enforcement.
However, while the strict enforcement era may be waning (at least for now), the trial of Tornado Cash developer Roman Storm this summer reveals that the concept of regulation by prosecution remains very much alive in the absence of clear regulatory guidelines.
Writing code is (potentially) a crime
Storm, a co-founder of the controversial crypto mixing service Tornado Cash, was detained in 2023 and charged with conspiracy to commit money laundering, conspiracy to breach U.S. sanctions, and conspiracy to operate an unlicensed money transmitting business — charges that collectively could lead to a maximum of 45 years behind bars for his involvement in a service that prosecutors say facilitated the laundering of over $1 billion in illegal funds, including by North Korea’s notorious hacking group, the Lazarus Group.
His arrest followed that of his co-founder, Russian national Alexey Pertsev, who had already been arrested and charged with similar offenses in the Netherlands. A Dutch court convicted Pertsev of money laundering in 2024, sentencing him to 64 months in prison, a verdict he is currently appealing. The U.S. has also charged a third developer, Russian national Roman Semenov, with the same charges leveled against Storm, but he is still at large.
Storm pleaded not guilty to all charges. At his trial in Manhattan in July, Storm’s defense team, led by Cooley LLP partner Brian Klein, contended that Storm and his co-founders simply developed a tool with legitimate privacy-focused intentions, which was misused by malicious actors. In her opening remarks, Waymaker LLP partner Keri Axel compared Tornado Cash to a hammer: useful for construction in the right hands, but a weapon in the wrong ones.
Prosecutors maintained that Storm and his associates were fully aware that hackers and scammers were exploiting Tornado Cash and chose not to intervene. They presented the jury with evidence suggesting that Storm benefitted from the illicit use of his software and was seemingly proud of it: photos of him at a crypto conference wearing a humorous t-shirt depicting a washing machine with Tornado Cash’s logo, along with images of his suburban Washington State residence partially financed through earnings from Tornado Cash. They even showcased a green neon sign of Tornado Cash’s emblem discovered during the FBI raid of Storm’s home.
The prosecution’s arguments evidently resonated with the jury — but so did Storm’s defense. After several days of deliberation, the jury returned with only one guilty verdict on the unlicensed money transmitting conspiracy charge (the least severe of the three charges, carrying a maximum sentence of five years). For the other charges, they could not reach a unanimous decision. As of publication, prosecutors have yet to announce whether they plan to retry Storm on the unresolved charges. Storm’s attorneys are seeking to have all three charges dismissed, including the one leading to his conviction.
DeFi developers at risk
Storm’s case has sparked significant backlash — and concern — among many in the crypto community, especially within the decentralized finance (DeFi) sector. Organizations and advocates like the DeFi Education Fund and the Solana Policy Institute have openly opposed Storm’s prosecution, filing amicus briefs and contributing to his defense, as they view the government’s actions as an example of prosecutorial overreach that could stifle the entire DeFi industry.
“Unfortunately, [Storm’s] trial has intensified awareness about a critical policy issue for the crypto ecosystem: whether someone can be held liable for creating a tool used by others, regardless of the tool’s nature,” commented Solana Policy Institute CEO Miller Whitehouse-Levine to CoinDesk. “His case has emphasized the risk of the U.S. government criminally charging individuals for how neutral software tools are utilized.”
The looming threat of substantial prison sentences for the actions of third parties using their technologies is already fostering a chilling effect among U.S.-based developers, warned Alex Urbelis, General Counsel for the
“The verdict will stifle innovation, especially for creators of privacy-focused technologies like mixers and zero-knowledge protocols,” Urbelis said. “Even if the primary goals of a project are positive and beneficial to society, the Roman Storm case warns that a significant amount of misuse by third parties could lead to criminal investigations. This will make many developers reconsider the U.S. as a base for their privacy-centric projects.”
Amanda Tuminelli, executive director and chief legal officer at the DeFi Education Fund, informed CoinDesk that Storm’s case has fostered “a culture of fear” among DeFi developers.
“Essentially, what Roman provided was a privacy solution that the Ethereum community desired and endorsed, and Github funded him to develop,” Tuminelli stated. “He created a non-custodial protocol that facilitated money transfers for others. Many within the community can see, ‘This could happen to me, I’m building in this space, I’m creating a non-custodial protocol, could I be next?’ This sentiment resonates deeply across the industry.”
Storm and his team launched Tornado Cash transparently, seeking funding from major venture capital firms such as Dragonfly Capital and operating under their real identities, Urbelis highlighted.
“There was once no concern about this project taking place in America because the country valued free speech, and privacy is supposedly sacred,” Urbelis commented. “This prosecution surely compels these types of [decentralized privacy] projects to reconsider their operational base and team locations.”
Blanche memo
The case against Storm originated under former President Joe Biden’s administration, marked by a collective reluctance to offer any genuine legal clarity to the crypto landscape, coupled with an aggressive pursuit of those perceived as infringing regulations.
Trump’s inauguration in early 2025 was heralded with promises that the climate for crypto would change during his second term. In January, he enacted an executive order vowing to provide “regulatory clarity and certainty” for the crypto sector. In April, Deputy Attorney General Todd Blanche circulated a memo to all DOJ staff, advising that the age of regulation through prosecution was over and that the department would be “narrowing” its emphasis on crypto enforcement, no longer pursuing actions against crypto exchanges, mixing services, or custodial wallets “based on end-user actions or unintentional regulatory breaches.”
On the surface, the Blanche memo seemed to directly address Tornado Cash and comparable cases. Attorneys and developers speculated that the Southern District of New York (SDNY) would dismiss their case against Storm. Instead, they opted to reduce one aspect of the money transmitting charge while advancing their case without constraint.
In August, following Storm’s conviction for unlicensed money transmitting, Acting Assistant Attorney General for the DOJ’s Criminal Division Matthew J. Galeotti delivered remarks indicating that the DOJ believes “merely writing code without malicious intent is not a crime.”
Steve Merriman, a partner in Perkins Coie’s fintech division in Seattle, told CoinDesk that both the Blanche memo and Galeotti’s statements do not prohibit the DOJ from criminally charging developers concerning third-party misuse under certain conditions.
“They still allow for the possibility of pursuing [money transmitting] charges, at least under a few theories if the circumstances warrant it,” Merriman explained.
Both Whitehouse-Levine and Tuminelli indicated to CoinDesk that they feel the DOJ’s public declarations will assist future cases involving DeFi creators, but emphasized that they fall short of delivering genuine protection or clarity for industry stakeholders.
Whitehouse-Levine stated that he believes both Galeotti’s address and Blanche’s memo will benefit future defendants, but cautioned that the DOJ’s avoidance of Prong C — the section surrounding funds obtained through criminal activities — was “deliberate.”
“It suggests that the Sword of Damocles continuously hangs over every developer in the sector moving forward,” Whitehouse-Levine remarked.
A vibe shift is not sufficient
The core issue is that, while pronouncements like those from Galeotti and Blanche signify the current administration’s viewpoint on crypto governance and enforcement, they do not represent a lasting solution.
“We require concrete legal amendments. We must genuinely reform the [money transmitting statute] to establish real, enduring changes regarding how the Department [of Justice] can apply that law,” Tuminelli stated.
Tuminelli and numerous industry figures express optimism that essential legal adjustments may emerge from the market structure bill currently under Senate consideration. However, policymakers believe discussions will extend into the New Year as Democrats and Republicans strive to settle their variances on crypto regulations.
“If you’re a lawmaker concerned about the ongoing issues within the sector, like consumer protection and rampant illicit finance — then what actions are you taking?” Tuminelli challenged. “You should prioritize passing a market structure bill that effectively regulates the majority of the industry in a feasible manner, yet lawmakers are fixated on excluding developer protections and failing to safeguard DeFi within the bill…It’s cognitive dissonance. If your goal is to ensure a safer regulatory framework for consumers, then implement that framework.”
In light of the lack of regulatory clarity from Congress, it is probable that a significant portion of the industry — particularly the DeFi segment — will persist in a legal gray area, where one government entity offers approval while another initiates legal action.
“I view [Storm’s prosecution] as the most flagrant instance of weaponizing the judicial system against crypto, not solely due to liability in this case, but also because the agency defining what constitutes a money transmitter contradicts the DOJ’s interpretation. We cannot have the Treasury and DOJ issuing conflicting guidance regarding compliance obligations for individuals,” Whitehouse-Levine stated. “It’s outrageous,” he added. “Individuals should not encounter situations where one branch of government assures them they’re compliant, while another attempts to imprison them.”
The human impact
While many see Storm’s trial as an opportunity for establishing legal clarity for DeFi amidst legislative inaction, others underscore the stark injustice of such discussions occurring while a person’s liberty hangs in the balance.
“We often perceive this as a broader struggle, but there’s a real individual whose freedom is at stake,” Urbelis noted. “This is a fight for liberty.”
Klein, Storm’s attorney, articulated to CoinDesk that the legal proceedings have been incredibly taxing on Storm personally: “It’s an exceedingly stressful and challenging situation for Roman, as it would be for anyone facing a highly aggressive — and, in my opinion, excessively aggressive and unwarranted — prosecution.”
“Being the public face of any situation is genuinely tough,” Tuminelli added. “Roman is a person. He has a daughter. He was taken into custody before his daughter. It’s critical to reintegrate the human perspective regarding this [prosecution]. When searching his name, this is what people find. I believe he has handled the pressure admirably and has remained principled…I hope the judicial system acknowledges that he did not commit the acts the indictment alleges. I’m confident that eventually, if not immediately, we will clarify the [money transmitting] charge, ensuring developers of noncustodial protocols are not classified as money transmitters. It’s merely a matter of how long it will take.”
The struggle remains
Storm’s legal fight is far from concluded. A hearing with District Judge Katherine Polk Failla of the SDNY is slated for January 22. During this proceeding, the court will evaluate the defense’s request to acquit Storm on all three charges and determine whether the government plans to retry him on the two unresolved charges.
“The crypto sector has long been at the legal forefront, and we perceive this case as one that should never have been initiated. Regulation should not rely on criminal prosecution,” Klein stated.
