The trial of a Tornado Cash developer begins

The trial of Roman Storm, one of the developers behind the Ethereum privacy app Tornado Cash, began this week in Manhattan.

Why it matters: For the government, this is a trial about anti-terrorism, money laundering and law enforcement having eyes on financial transactions.

• For the defense, this is about whether or not developers have the right to publish code the same way writers write.

What they're saying: Prosecutors called Tornado Cash a "giant washing machine for dirty money," according to Inner City Press.

• The government said it would show evidence that Storm cashed out and that doing so was his main intent in launching the project.
• The defense said that they would show the government cannot prove criminal intent, since Storm had no involvement with any of the lawbreakers who used the platform he and his colleagues built.

How it works: Tornado Cash is an app on the Ethereum blockchain that made it feasible for a user to break the chain of custody for crypto assets, so they could hide how they were finally disposed of.

• They did this by mixing assets. A user could drop a large amount of digital assets in Tornado Cash and withdraw it to a different crypto address at a later date.
• If lots of people were depositing and withdrawing, Tornado Cash made it impossible to know exactly which withdrawals were related to which deposits.
• This allowed a person to, for example, make an anonymous donation to a dissident group abroad — or to hide the fact that funds were stolen from an insecure Defi protocol before depositing it on chain.

Fun fact: One on-chain thief got phished by a fake Tornado Cash, so their stolen funds got stolen.

Between the lines: Once the protocol was live, its developers had no power over it. They couldn't edit or change it.

• But they did have control over the most popular interface for interacting with it, the Tornado Cash website. Without the site, it took more technical skill to use the privacy app, but it was still accessible.

In the weeds: One of the witnesses for the government was a staffer at Sky Mavis, the company behind the once buzzy crypto game, Axie Infinity, which was hacked for $600 million worth of crypto currency in 2022.

• The government also called a witness who operated an NFT pump-and-dump scheme and walked off with $1.1 million in investor money, testifying that the app was the best option for covering their tracks.
• Other witnesses said they went to Tornado Cash after being exploited by cybercriminals and received no help.

State of play: Courts previously struck down the sanctions preventing Americans from using the privacy app.

• Storm was arrested in 2023. He's the only one of its developers on trial in the U.S.
• Another developer, Alexey Pertsev, is appealing a 64-month sentence in the Netherlands.
• Roman Semenov, who was also charged by the DOJ, remains at large.

What we're watching: The defense reportedly advocated for the need for privacy in one's financial transactions in opening arguments.

• The government has since moved to preclude evidence and arguments based on privacy rights.