Federal authorities oppose the defense motion, arguing that Tornado Cash effectively transferred users’ funds.
According to reports from The Rage, Tornado Cash developer Roman Storm should not be acquitted of the charges. This is the position of the United States government, expressed through an official document opposing the motion for acquittal filed by the defendant.
Last October, Storm was found guilty of conspiracy for operating a money transfer service without the necessary licenses. The sentence was issued by the district court of the Southern District of New York (SDNY).
During the trial, the jury failed to reach a unanimous verdict on two additional charges: conspiracy to launder money and violation of US sanctions. This procedural deadlock left some questions open.
Following the conviction, Storm filed a formal motion requesting acquittal on all charges. The federal government has now responded with a detailed opposition, reaffirming the validity of the charges.
The government’s position
The heart of the legal controversy concerns the technical nature of Tornado Cash and its classification as a money transfer service. According to prosecutors, the platform effectively transferred users’ funds, thus constituting a violation of existing regulations.
“The jury reasonably concluded that Tornado Cash transferred funds,” the government states in the opposition document. This assertion contrasts with the 2019 FinCEN (Financial Crimes Enforcement Network) guidelines, which exempted non-custodial services from money transfer laws.
The government rejects the defense’s argument that Tornado Cash’s user interface merely “read” the blockchain without “writing” to it. According to prosecutors, such technical distinction is “both factually wrong and irrelevant.” The prosecution argues that withdrawals constitute fund transfers executed exclusively by Tornado Cash, not by the user’s wallet.
The custody controversy
The question of custody represents a critical point. Storm’s conviction for violations related to money transmission has been contested by experts and industry observers. Many refer to the 2019 FinCEN guidelines, which explicitly excluded non-custodial services from monetary transmission regulations, precisely because they do not hold or transfer funds on behalf of the public.
The government invites the court to “adhere to its prior ruling that custody is not a requirement of the statute and reject that argument.” This position refers to a pre-trial conference in which Judge Failla had established that “a control requirement is not in the statute and this court is not going to read it in.”
Judge Failla also prevented Storm’s defense from mentioning FinCEN guidelines during the trial, despite communications that emerged in the case against Samourai Wallet developers demonstrating that senior FinCEN officials had explicitly stated that “a mixer like Samourai that does not take custody of the cryptocurrency by possessing the private keys would strongly suggest that Samourai is not acting as an MSB.”
License violations for services not subject to licensing
After withdrawing the charge related to federal license violations, the government continued to argue that Storm could be held responsible for knowingly transmitting illicit proceeds under a subsection of the money transmission law.
The defense contested this logic, arguing that the applied subsection “does not operate, like the government would have it, as a standalone prohibition on conduct related to the transfer of funds. […] Subsection (b)(1)(C) only applies to money transmitting businesses that are federally registered.”
Peter van Valkenburgh, CEO of CoinCenter, commented:
So if I can be “unlicensed” because of conduct described in (b)(1)(C) but no state or federal agency licenses that conduct then how in god’s green earth am I unlicensed?
The government sees no inconsistencies in its own logic, defining the defense argument as impossible to “be squared […] with common sense.” According to the prosecution, “the definition of ‘money transmitting business’ as defined by the Bank Secrecy Act […] does not apply to or limit the scope of the other prongs.” Prosecutors argue that accepting the defense’s interpretation would lead to “absurd results,” allowing any business to transfer unlimited illicit proceeds simply by not registering with FinCEN or with the State.
Code as a form of expression
In his motion for acquittal, Storm argued that his criminal prosecution violates the First Amendment of the American Constitution, which has long classified computer code as a protected form of expression. According to the defense, the government essentially argued that the developer should have created a completely different service to avoid criminal charges, effectively criminalizing any programmer’s right to free expression.
“The government’s arguments at trial also reflected ‘disagreement with the message [the speech] conveys,'” the defense highlighted, citing the prosecution’s repeated claims that Tornado Cash’s decentralized nature would indicate that it was designed for criminals rather than to provide privacy to users.
“Remember, when the defense says privacy, what that really means is hiding money for criminals, not providing privacy to regular people,” the prosecution had stated during the trial. The government continues to describe Tornado Cash as “a haven for money launderers,” despite data showing that only 10% of the overall volume on the platform was traceable to illicit activities.
The government’s response on censorship allegations
The government categorically rejects the First Amendment argument. “The premise of his argument—that he is being prosecuted for expressive conduct—is simply wrong,” the opposition states. “This prosecution and the evidence at trial related to the function of the computer code that operated Tornado Cash, i.e., the way that it ‘facilitated a user’s transaction on the blockchain.'”
The prosecution cites the case Universal City Studios, Inc. v. Corley as legal precedent, although according to CoinCenter this “is no longer good case law in the Second Circuit and the Supreme Court.”
The government states it has no intention of criminalizing privacy itself. The opposition instead argues that “the Government has substantial interests in combating the laundering of criminal proceeds and restricting transactions involving property of actors that have been determined to be a threat to national security,” which it finds “unrelated to any interest in suppressing free expression.”
According to the government, Storm has argued that there are alternatives to holding software developers accountable, such as requiring Tornado Cash users to keep their own transaction records and provide them to exchanges when requested. For the prosecution, however, such reasoning is irrelevant and dangerous: “If such ‘alternatives’ could be used to sustain an as-applied challenge to a criminal prosecution, the Government would never be able to enforce these laws against large-scale illegal money transmitters and money launderers,” the government concludes.
