Coin Center raises legal questions over Tornado Cash co-founders’ indictment

Peter Van Valkenburgh argues that the indictment against Tornado Cash contradicts FinCEN guidelines


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Coin Center is contesting the latest indictments against Tornado Cash.

Peter Van Valkenburgh, research director at the non-profit blockchain advocacy group, stated that the indictment’s limited facts don’t clearly indicate any legal violations of the relevant law.

The US Justice Department charged the co-founders of Tornado Cash with money laundering and sanctions violations on Wednesday. 

Additionally, co-founder Roman Semenov was placed on the Office of Foreign Assets Control’s (OFAC) list of specially designated nationals. Roman Storm, Semenov’s business associate, was also implicated. Both are accused of laundering over $1 billion in illicit funds via their crypto mixing service.

Valkenburgh argued in a Wednesday blog that the allegations in the indictment seem to contradict guidelines set by the US Financial Crimes Enforcement Network (FinCEN).

Read more: DOJ arrests Tornado Cash co-founder Roman Storm, OFAC sanctions Roman Semenov

He stated that Tornado Cash merely supplies the software for money transmission, rather than transmitting money itself.

He further pointed out that the indictment lacks factual evidence to demonstrate that the accused were involved in activities that would legally be considered money transmission.

Valkenburgh cited FinCEN’s interpretation of the relevant rule under the US Bank Secrecy Act, which states that a provider of anonymizing software is not considered a “money transmitter.”

“The indictment provides various factual allegations describing the activities the defendants performed, but all of those facts point to the defendants fitting squarely within FinCEN’s guidance on anonymizing software providers rather than them being money transmitters,” the research director wrote.

He also stated that while the government accuses the defendants of promoting Tornado Cash, earning profits from a governance token and creating various features of the tool, none of these actions constitute the receipt and transfer of money.

In 2022, OFAC imposed sanctions on Tornado Cash, alleging that the platform enabled hackers to launder $7 billion in cryptocurrency. They specifically targeted 45 Ethereum wallet addresses.

In response, Coin Center filed a lawsuit against the US Treasury, claiming that the sanctions imposed on Tornado Cash unlawfully penalize Americans seeking to safeguard their privacy when utilizing their own digital assets.

The US federal court recently upheld sanctions against the crypto mixing service, dismissing a separate Coinbase-backed lawsuit. The ruling has wider implications, impacting individuals who seek to use privacy-focused protocols for lawful purposes.

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