Tornado Cash developer prosecution proceeds

Federal prosecutors are proceeding with their case against Roman Storm, one of the developers of Tornado Cash.

Why it matters: The DOJ's decision comes as many talking heads interpreted a recent internal department memo to mean the Trump administration didn't intend to pursue crypto-related crime.

Catch up quick: Tornado Cash is a privacy protocol running on the Ethereum blockchain.

• Its use was prohibited under the Biden administration, until the courts revoked that designation in November. Then the Trump Treasury dropped the sanctions in March.

Yes, but: That hasn't seemed to have helped the team that built the protocol, including Storm, who was arrested in the U.S. in August 2023 and charged on three counts (originally, it was only two).

The latest: "After review of this case, this Office and the Office of the Deputy Attorney General have determined that this prosecution is consistent with the letter and spirit of the April 7, 2024 Memorandum from the Deputy Attorney General," the U.S. Attorney for the Southern District, Jay Clayton, wrote in a letter to the court on May 15.

Between the lines: The memo in question was one in which the Deputy Attorney General directed Justice staff investigating the digital asset industry to prioritize prosecutions involving sanctions evasion, theft and other kinds of traditional crimes, rather than litigating the legal status of a given asset.

• The counts against Storm are conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business and conspiracy to violate the International Emergency Economic Powers Act.

Clayton did say that he would not prosecute one part of one charge: On count two, the money transmission count, he won't pursue the fact that they hadn't registered the protocol.

• But he would pursue the charge that the defendant knew Tornado Cash was transmitting funds that were illegal to facilitate.

The intrigue: That money transmission business charge could have been dropped because of a bombshell revelation in another case.

• During discovery, those defendants found that FinCen did not believe non-custodial mixers count as money transmitters.

What we're watching: Roman Semenov, another Tornado Cash developer, is still wanted by the FBI.

Zoom out: Funds tucked away in Tornado Cash are ticking back up, but slowly. The low point for 2025 was around $276 million in total value locked in the protocol.

• It's up to around $452 million, which sounds like a big gain, but it was over $1 billion in 2021.
• Privacy Pools has since been launched as a privacy protocol that should make law enforcement more comfortable, but it's still pretty small.