May 14, 2024 - Economy

Tornado Cash developer convicted in The Netherlands

Illustration of a tornado made of money.

Illustration: Aïda Amer/Axios

Alexey Pertsev, the Russian national arrested in the Netherlands for developing cryptocurrency privacy application Tornado Cash, has been sentenced to 64 months in prison.

Why it matters: The judgment is likely to make other software developers reluctant to work on privacy-preserving technology in the future.

What they're saying: "Tornado Cash in its nature and functioning is a tool intended for criminals," one of the three judges said from the bench, per DL News.

Catch up quick: Tornado Cash is an application on Ethereum that allows many users to mix up their transactions. Users deposit assets into a smart contract and withdraw them later to a new address.

  • Tornado Cash makes it nearly impossible to link the deposits to the withdrawals.
  • Notable cybercriminals, such as the Lazarus Group, have been known to use Tornado Cash to cover their tracks after stealing large amounts of crypto assets from projects hosted on Ethereum.
  • In August 2022, the service fell under sanction by the U.S. government.

Friction point: The blockchain industry has rallied to the cause of Tornado Cash, though with little effect.

As an immutable smart contract on Ethereum, Tornado Cash remains live, with over $400 million worth of deposits.

What's next: Pertsev has 14 days to file an appeal.

  • Arrested in 2022, he went to jail from the courtroom. The eight months he has served will be deducted from his sentence.
  • Roman Storm, a fellow developer on the application, detained in the United States since his arrest in 2023, is set for trial in the U.S. in September.

What we're watching: Developers have been working on a new idea for "privacy pools," a concept designed to comply with financial regulations.

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