The year 2025 marked a significant celebration for many in the crypto sector, as they embraced the noticeable shift towards digital asset regulation instigated by U.S. President Donald Trump’s inauguration in January.
Politicians and industry leaders rejoiced at the removal of former U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, the installation of crypto-enthusiastic regulators, and the cessation of numerous Biden-era investigations into key crypto firms, viewing it as a triumph over regulation by enforcement.
However, even though the period of regulation through enforcement might seem behind us (at least for now), the trial of Tornado Cash developer Roman Storm this summer demonstrates that, in the ongoing lack of genuine regulatory clarity for crypto, the prosecution as a means of regulation remains very much alive.
Coding could (potentially) be criminal
Storm, a developer and co-founder of the controversial crypto mixing service Tornado Cash, faced arrest in 2023 and was charged with conspiracy related to money laundering, conspiracy to breach U.S. sanctions, and conspiracy to operate an unlicensed money transmission business — all of which could result in a total prison sentence of 45 years. Prosecutors alleged that the service he helped create facilitated the laundering of over $1 billion in illicit profits, including those tied to the notorious North Korean hacking group, the Lazarus Group.
The arrest of Storm followed that of his co-founder, Russian national Alexey Pertsev, who had already been taken into custody and accused of similar offenses in the Netherlands. A Dutch court convicted Pertsev of money laundering in 2024, sentencing him to 64 months, which he is currently contesting. Additionally, a third developer, Russian national Roman Semenov, has been charged in the U.S. with the same offenses as Storm but remains unapprehended.
Storm has pled not guilty to all charges. During his July trial in Manhattan, his legal team — led by Brian Klein of Cooley LLP — contended that Storm and his co-founders created a tool with genuine, privacy-centric intentions, which unfortunate actors then misused. In her opening remarks for the defense, Keri Axel of Waymaker LLP compared Tornado Cash to a hammer: useful for construction in one context, yet a tool for harm in another.
Prosecutors maintained that Storm and his associates were fully aware of the hackers and fraudsters employing Tornado Cash but chose not to intervene. They presented the jury with evidence they claimed showed that Storm profited from the misuse of his software and even took pride in it: photos of him at a crypto conference wearing a playful t-shirt featuring a washing machine adorned with Tornado Cash’s logo, and images of his suburban home in Washington State, partially funded by earnings from Tornado Cash. They even showcased a green neon sign of Tornado Cash’s logo found during the FBI raid on Storm’s residence.
The prosecution’s case appeared to influence the jury, yet so did Storm’s defense. After several days of deliberation, the jury returned a single guilty verdict on the unlicensed money transmitting conspiracy charge, which is the least severe of the three offenses, carrying a maximum five-year sentence. For the remaining charges, they could not reach a unanimous decision. As of this writing, prosecutors have not indicated if they will attempt to retry Storm on the unresolved charges. Storm’s attorneys have requested the court dismiss all charges, including the one resulting in a guilty verdict.
DeFi developers under scrutiny
Storm’s case has generated significant attention — and frustration — within the crypto community, particularly among decentralized finance (DeFi) advocates. Organizations like the DeFi Education Fund and the Solana Policy Institute have openly criticized Storm’s prosecution, submitting amicus briefs and financially supporting his defense, viewing the government’s actions as prosecutorial overreach that poses a significant threat to the broader DeFi realm.
“Unfortunately, [Storm’s] trial has considerably raised awareness around one of the most pressing policy issues facing the entire crypto ecosystem, which is whether individuals can be held accountable for creating a tool that can be utilized by anyone, including those who misuse it,” stated Solana Policy Institute CEO Miller Whitehouse-Levine to CoinDesk. “His case has amplified the risk of the U.S. government holding developers criminally liable for the actions of others who misuse neutral software tools.”
For developers creating tools, the potential for severe criminal penalties resulting from third-party misuse is already inducing a chilling effect on U.S.-based innovation, according to Alex Urbelis, General Counsel for the
“The verdict will certainly discourage innovation, specifically for those working on privacy-focused technologies such as mixers and zero-knowledge protocols,” Urbelis remarked. “Even if a developer’s primary intent is to contribute positively to society, the Roman Storm case implies that significant third-party misuse could result in criminal accountability. This will inevitably lead many developers to reconsider the U.S. as a foundation for their privacy-centric projects.”
Amanda Tuminelli, Executive Director and Chief Legal Officer at the DeFi Education Fund, shared with CoinDesk that Storm’s prosecution has “fostered a climate of fear” among DeFi developers.
“At its core, what Roman did was offer a privacy solution requested by the Ethereum community, for which Github even provided funding,” Tuminelli commented. “He developed a non-custodial protocol used by others to manage their own funds. Many developers may now think, ‘Could I be next?’ while working in a similar space.”
Storm and his team developed Tornado Cash transparently, soliciting support from prominent venture capital firms like Dragonfly Capital and operated under their real identities, Urbelis emphasized.
“There was no apprehension about pursuing this project in America because it embodies the principles of free speech and privacy that we supposedly uphold,” Urbelis explained. “This prosecution certainly compels these decentralized privacy initiatives to reassess where they establish their headquarters and their personnel.”
The Blanche memo
The case against Storm originated under the administration of former President Joe Biden, during which there was a pervasive reluctance to provide genuine legal clarity to the crypto sector coupled with an aggressive pursuit of those who stepped outside regulatory boundaries.
Trump’s return to office brought promises of transformative changes for the crypto sector. In January, he issued an executive order committing to delivering “regulatory clarity and certainty” for the crypto industry. Later, in April, Deputy Attorney General Todd Blanche circulated a memo to all Department of Justice (DOJ) personnel, stating that the era of regulation through prosecution had concluded, indicating that the entire department would be “narrowing” its focus on crypto enforcement and refraining from pursuing cases against crypto exchanges, mixing services, or offline wallets concerning the actions of end users or inadvertent regulatory violations.
At first glance, the Blanche memo appeared to directly address cases like Tornado Cash. Legal experts speculated that the Southern District of New York (SDNY) would drop their charges against Storm. Instead, they responded by modifying one aspect of the money transmitting charge while continuing full-scale with their prosecution.
In August, following Storm’s conviction for unlicensed money transmission, Acting Assistant Attorney General for the DOJ’s Criminal Division Matthew J. Galeotti delivered a speech asserting that, in the DOJ’s perspective, “simply writing code without malicious intent is not a crime.”
Steve Merriman, a partner in Perkins Coie’s fintech group based in Seattle, told CoinDesk that both the Blanche memo and Galeotti’s statements do not exclude the possibility of criminal charges against developers for third-party misuse under specific conditions.
“They have not closed the door to pursue [money transmitting] charges if circumstances justify it,” Merriman noted.
Both Whitehouse-Levine and Tuminelli expressed to CoinDesk that they believe the DOJ’s public statements could be beneficial for future cases against DeFi developers, but underscored that these do not provide adequate protection or clarity for industry players.
Whitehouse-Levine believes that both Galeotti’s address and the Blanche memo will serve future defendants well, but pointed out that the DOJ’s avoidance of Prong C — the segment of the money transmitting law that pertains to funds obtained from criminal activities — was “strategic.”
“It implies that the Sword of Damocles looms over every developer in the field moving forward,” Whitehouse-Levine cautioned.
A change in tone isn’t sufficient
The core issue is that while statements like Galeotti’s and Blanche’s indicate the current administration’s approach to crypto regulation and enforcement, they are far from a comprehensive solution.
“We require lasting changes to the laws. There needs to be a genuine reevaluation of the [money transmitting statute] that provides real, permanent alterations to the Department [of Justice]’s capabilities under that law,” Tuminelli argued.
Tuminelli, along with numerous individuals in the sector, is hopeful that these critical legal adjustments may arise through a market structure bill, currently under consideration in the Senate. Nevertheless, policy insiders suggest that these negotiations might extend into the following year as Democrats and Republicans continue to reconcile their differing views on regulating the industry.
“If you’re a lawmaker concerned about developments in this space, worried about consumer protection, and fearful of rampant illicit activities — then what proactive measures are you taking?” questioned Tuminelli. “You should be pursuing a market structure bill to regulate 95% of the industry in a practical and achievable manner, but instead, lawmakers are disproportionately focused on excluding developer protections and ensuring DeFi remains unprotected under the bill…It’s a dissonance. If your priority is to foster a safer regulatory atmosphere for consumers, then create a framework that guarantees greater safety for them.”
In light of the lack of regulatory clarity from Congress, the industry — particularly the DeFi sector — will likely continue to operate in a murky legal environment where one government entity grants approval while another files charges.
“I see [Storm’s prosecution] as a glaring instance of the judicial system being weaponized against crypto, not solely due to the legal exposure in this case, but also because the agency defining what a money transmitter constitutes is at odds with the DOJ’s interpretation. This discrepancy cannot persist — we cannot have different agencies providing conflicting answers regarding individual obligations,” Whitehouse-Levine asserted. “This is unacceptable,” he declared. “It should not be permissible for one branch of government to declare compliance while another seeks to impose criminal charges.”
The human impact
While many view Storm’s case as a chance to achieve some degree of legal clarity for DeFi amid Congressional inaction, others emphasize the profound injustice of discussing broader implications while a person’s freedom hangs in the balance.
“We often perceive this as a broader conflict, but there’s a real individual whose freedom is at stake,” Urbelis reflected. “This is about the struggle for liberty.”
Klein, Storm’s attorney, shared with CoinDesk that the prosecution has had a severe impact on Storm’s personal well-being: “This is an exceedingly stressful and challenging time for Roman, as it would be for anyone confronting such an aggressive — and I believe overly aggressive and unwarranted — prosecution.”
“It’s incredibly challenging on many levels to be in the spotlight,” Tuminelli noted. “Roman is a human being. He has a daughter. He was arrested in front of her. We must reintegrate the human aspect of this [prosecution] into the discussion. When you search for his name online, this is what comes up. I hope the justice system recognizes that he did not commit the acts outlined in the indictment. I remain optimistic that we will eventually clarify the [money transmitting] charge and that software developers creating noncustodial protocols will not be labeled as money transmitters. The only question is how long it will take to achieve this.”
The battle persists
Storm’s legal struggles are far from concluded. A hearing in front of District Judge Katherine Polk Failla of the SDNY is set for January 22. During this session, the court will evaluate the defense’s motion to acquit Storm on the charges and will also address whether the government plans to retry him on the unresolved charges.
“Crypto has long been a forefront topic in legal discussions, and we view this case as one that should never have reached this stage. Regulating through criminal prosecution is not the appropriate approach,” Klein stated.
