The Southern District of New York held the hearing on Tornado Cash developer Roman Storm’s motion for acquittal, with Judge Failla repeatedly disagreeing with the prosecution’s theories.
As reported by The Rage, last Thursday the Southern District of New York (SDNY) heard arguments from both prosecution and defense on the motion for acquittal of Tornado Cash developer Roman Storm. The long-awaited hearing will determine whether Storm faces a new trial and whether his conviction will be overturned. Storm had been convicted on one count of conspiracy to operate an unlicensed money transmission service, and his defense filed a so-called Rule 29 motion, which would allow the court to overturn the conviction if the evidence presented at trial is deemed legally insufficient.
Discussions focused primarily on jurisdiction – specifically whether an overt act of the alleged criminal conspiracy actually took place in the Southern District of New York. Three main issues emerged at the center of the debate: the separation between Tornado Cash’s user interface (UI) and the protocol itself, whether Tornado Cash actually transferred funds, and whether the protocol was operated with criminal intent. The defense emphasized that payments made to Infura – a widely used hosting service in the Ethereum ecosystem – had been made in cryptocurrency, without involving any New York bank accounts, and that Infura was only used to host the UI, which is not essential for accessing the protocol.
Storm’s attorney, Brian Klein, insisted on the distinction between the UI as a neutral access tool to the protocol and the protocol itself: “It is not a tool specifically designed to facilitate money laundering. Legitimate users could and did use it.” Judge Failla responded that she had already seen the “neutral tool” arguments but had not found them reflected in case law. Klein also clarified that the total illicit funds that passed through Tornado Cash during the entire contested period amounted to a maximum of 15% of transaction volume, asking what threshold of illicit funds would constitute criminal intent.
The prosecution, represented by Ben Arad, took positions that on several occasions left the judge puzzled. Arad argued that Tornado Cash was the entity transferring the funds, citing the role of relayers in withdrawal operations, and that Storm controlled “the Tornado Cash protocol as a whole.” He then advanced the theory that all funds in the protocol could be considered illegitimate because they contributed to the operation of the service, even if only a percentage came from criminal activity – and that therefore every improvement made to it constituted a criminal act. Failla responded: “I might say you were doing better before you started talking,” using as an example the fact that Windows continuously improves its features for the benefit of both legitimate and illegitimate users, without this constituting a crime.
A point of strong tension concerned the concept of inaction as a crime. The prosecution argued that Storm could have avoided criminal liability by shutting down Tornado Cash or withdrawing from the operation once he became aware of its criminal use. Klein countered that a cryptocurrency mixer is legal – a position admitted by the prosecution itself – and that the government cannot argue that operating one was inherently illegal. Failla repeatedly pressed the prosecution on exactly when criminal liability would have arisen, receiving the response that “every step taken in furtherance of that service was a criminal act.” The judge stated she was “concerned” if the prosecution’s theory came down to keeping the business alive knowing it was being used for illicit purposes, and clarified that she might ultimately agree with the defense on the insufficiency of the prosecution’s theories, while reserving her final decision.
Judge Failla nonetheless noted that internal communications showed that Storm and his team were aware of potential criminal liability, even if “whether their concerns actually translate into criminal liability may be a different question.” The suggested dates for a possible new trial – on the two remaining counts of conspiracy to violate sanctions and conspiracy to commit money laundering – are October 26, November 30, and January 2027. The judge, however, urged the parties not to interpret the hearing as indicative of her final position on the matter.
