From Sanctions to Legal Trials: The Debate on Tornado Cash's Privacy and Responsibility

Tornado Cash: Defender of Privacy or Money Laundering Tool?

Tornado Cash, a decentralized mixing protocol running on the Ethereum blockchain, was widely used for its strong privacy protection features, which also made it a target for regulatory authorities.

In August 2022, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, placing it on the Specially Designated Nationals (SDN) List, accusing it of being used for Money Laundering, particularly by the North Korean hacker group Lazarus in processing over $1 billion in illegal funds. This marked the first time the U.S. imposed sanctions on an on-chain project, shaking the entire crypto industry.

However, on March 21, 2025, things took a turn for the better when the U.S. Treasury suddenly withdrew the sanctions, removing the blacklist label from Tornado Cash and all its associated addresses. This decision was not entirely unexpected—back in November 2024, the Fifth Circuit Court of Appeals had thrown cold water on the Treasury, ruling that the core smart contract of Tornado Cash did not meet the definition of "property" and that the sanctions were beyond their authority.

However, the lifting of sanctions does not mean that the developers can escape. Alexey Pertsev was sentenced to 5 years and 4 months in prison for Money Laundering by a Dutch court as early as May 2024; meanwhile, Roman Storm, far away in the United States, is still mired in legal troubles.

This lawsuit has sparked a debate: should the authors of open-source code be held accountable for the misuse of their tools? The Solana Policy Research Institute provided $500,000 in funding for the legal defense of Storm and Pertsev, emphasizing that "writing code is not a crime." Ethereum founder Vitalik Buterin and others have also raised funds to defend them, demonstrating the high level of concern within the crypto community regarding this case.

Roman Storm: Accused of Money Laundering, Jury Unable to Reach Consensus

In August 2023, Roman Storm was indicted by U.S. prosecutors on eight counts, including "Money Laundering", "violating sanctions", and "operating an unregistered money transmission business". On July 14, 2025, Storm's trial began in Manhattan, New York. Although the jury could not reach a unanimous verdict on the charges of "Money Laundering" and "violating sanctions", leading to those charges being dismissed or pending; Storm was still found guilty of "conspiracy to operate an unregistered money transmission business", facing a maximum sentence of five years.

This ruling has sparked widespread discussion. Some believe that Storm, as a technology developer, should enjoy the right to free speech and should not be held responsible for the abuse of the decentralized tool he created. On the other hand, there are voices that argue that although Storm cannot control every detail of the protocol's use, if he is aware that the tool is widely used for illegal activities and does not take measures to control it, then he should be held accountable for its misuse.

Technology is Innocent: The Boundaries of Law and Morality

The slogan "Technology is Innocent" has a considerable market among the open-source community and decentralized believers, and the logic behind it is simple: the tools themselves are neutral, the crime lies with the users.

Many countries, especially the United States, often regard technology developers as creators who enjoy the right to free speech, which means that the code they write should not automatically bear responsibility for abusive behavior. For example, under Section 230 of the Communications Decency Act, internet service providers typically do not hold liability for the actions of users on their platforms. Although this provision primarily applies to internet platforms, it offers similar protections to developers of decentralized protocols, assuming that the developers did not directly participate in illegal activities.

However, not all countries fully agree with this concept. For example, in the Netherlands, Tornado Cash developer Alexey Pertsev was sentenced for allegedly assisting in Money Laundering. The Dutch court held that open-source software developers might bear some responsibility for the misuse of their tools. This reflects the differing positions and understandings of technological responsibility across different judicial systems.

Money Laundering Crime Identification

In the United States, money laundering offenses are typically prosecuted under the Money Laundering Control Act. According to this law, money laundering activities include the illegal transfer of funds through banks or other financial institutions, aimed at concealing, disguising, or legitimizing illegal proceeds. The elements constituting the crime of money laundering mainly include the illegal source of the funds and various transactions conducted to conceal the source of the funds.

"Knowledgeable" Standard

Most jurisdictions regard "knowingly derived from criminal activity" as the subjective requirement for the crime of Money Laundering, meaning the defendant must be aware that the activities they are involved in involve the transfer of illegal funds. If the defendant is completely unaware of the illegal source of the funds, they are generally not considered to have the intent necessary for a Money Laundering charge, and the United States is no exception. However, in certain cases, even in the absence of clear evidence showing that the defendant "knew" the source of the funds was illegal, it may still constitute relevant liability for Money Laundering if it can be proven that they had reasonable suspicion or willfully ignored the illegal source of the funds.

For example, Article 1956 of the Money Laundering Control Act clearly states that anyone who "knows or has reasonable grounds to know" that a financial transaction involves illegal funds may be considered to be participating in money laundering. This means that even without direct evidence showing that the defendant "knew" the source of the funds was unlawful, as long as there are obvious suspicious circumstances or acts of negligence, the court can still determine that the individual is suspected of money laundering.

The "Knowledge" Issue of Tornado Cash Developers

In the case of Tornado Cash, whether the developers met the "knowledge" standard became a key issue in determining their responsibility for Money Laundering. According to the charges brought by U.S. prosecutors, the developers of Tornado Cash are accused of "intentionally" creating a tool that allows for anonymous transfers, facilitating Money Laundering activities. However, the defense argues that as developers of a decentralized protocol, they did not control or know the specific ways in which the protocol was misused.

Whether developers meet the "knowledge" requirement, the court may consider the following factors:

1. Purpose of the Technical Tool: Tornado Cash, as an open-source and decentralized protocol, is theoretically designed to enhance user privacy rather than specifically for Money Laundering. However, whether the court can determine that the developers should have anticipated that this tool could be used for illegal activities remains a contentious issue.

2. Public Information and Warnings: If developers or the community are aware that the tool is frequently used for illegal transactions but have not taken any measures to stop or warn against it, the court may consider that the developers possess the subjective intent of "knowledge" or willful ignorance.

3. Developer Behavior and Responsibility: U.S. prosecutors may argue that the developers of Tornado Cash could be deemed to have "knowingly" allowed their tool to be used for Money Laundering if they had sufficient understanding of the potential misuse of their tool or if they failed to impose necessary constraints or monitoring on the tool's anonymity.

These factors unfold the discussion on the responsibilities of developers in the design of decentralized financial tools from different perspectives. Although the original intention of the technology is not criminal, how to define the responsibility of developers after its abuse is clearly a complex and multi-layered issue. As the cases progress, how the law balances innovation and compliance may affect the future direction of blockchain technology.

Conclusion: Who Will Bear the Cost of Innovation?

The Tornado Cash case has long transcended the fate of individual developers; it is setting boundaries for the entire decentralized finance industry. If even the authors of open-source code could end up in prison due to users' illegal activities, who would dare to innovate? On the other hand, if anonymous tools are allowed to grow unchecked, wouldn't criminal activities become even more rampant?

This case is very likely to become a future benchmark - the final outcome of the case not only determines the fate of Storm but also sets a standard for the entire crypto community's code of conduct. How should technology, law, and society compromise on the balance between privacy and compliance? Perhaps the answer is still waiting for consensus to form, just like blockchain.