Southern District, Stand Down: Prosecuting Code Is Not Justice

Roman Storm is facing up to forty-five years in federal prison. His offense? Writing open-source code.

Storm helped build Tornado Cash, a tool that lets users engage in private transactions on the Ethereum blockchain. There are many reasons a user may need privacy when they send money to another party: avoiding publicity, reducing risk of a hack, making a contribution to a politically unpopular cause, or ensuring safety for human rights activists or journalists. Storm himself is a political refugee; after protesting the Russian invasion of Georgia in 2008, he was persecuted by the Russian Federal Security Service before fleeing to the United States and becoming a citizen. But it turns out his trouble with the government was only just beginning.

The Tornado Cash tool is not administered by any central authority. Roman Storm has no control over the code or the assets running through it. Yet prosecutors in the Southern District of New York claim that merely developing this tool to allow others to engage in peer-to-peer transactions amounts to a criminal conspiracy to operate an “unlicensed money transmitting business.” That’s like attempting to criminalize building Fords because someone might drive a Mustang in a bank robbery.

The government’s case doesn’t just stretch the law, it breaks it. The criminal law at issue, 18 USC § 1960, was enacted over thirty years ago to regulate financial institutions that actually transmit money by receiving funds from one party and passing them along to another. But Tornado Cash and its developers are not financial institutions: unlike a bank, they don’t ever receive funds or control a third party’s transaction at all. To the contrary, Tornado Cash is autonomous code that allows transactions directly from one party to another without any intermediaries.

For years, the Treasury Department has recognized that developers who publish software are not money transmitters. In 2014, the Obama Treasury Department explained that “the production and distribution of software, in and of itself, does not constitute acceptance and transmission of value.” In 2019, Treasury further explained that “total independent control” over users’ crypto was a key factor in determining whether an intermediary is a money transmitter under the Bank Secrecy Act. Providers of noncustodial “mixers” like Tornado Cash are not money transmitters if they are simply “suppliers of software” that do not “accept… and retransmit” crypto. Courts, too, typically assumed “control” over transmitted assets as a practical threshold. In every federal Section 1960 case until this one, that element was present. But not here.

As Senators Wyden (D-OR) and Lummis (R-WY) argued in a bipartisan condemnation letter last year, “It is very concerning that DOJ would adopt an interpretation of this registration requirement that is contrary to another Federal agency. This makes it difficult for ordinary Americans to determine what their legal obligations are.”

What caused the government’s monumental shift? In 2021, the Biden Administration commenced its Elizabeth Warren-directed “war on crypto,” with every tentacle of government employing its own powers to strangle a nascent industry. The SDNY’s actions should be viewed as part of this larger strategy, including SEC Chair Gary Gensler’s unfounded enforcement actions (since walked back by the new SEC), the OCC/FDIC orchestration of Project Chokepoint 2.0 (since walked back by new Trump appointees), the nonsensical IRS DeFi broker rule (since overturned by Congress and President Trump), and even the sanctioning of Tornado Cash itself (since rejected by the Fifth Circuit and reversed by the Trump Treasury Department).

Doing its part to enforce the government’s anti-crypto strategy, but faced with a stack of unfavorable case law, SDNY prosecutors pivoted: if Storm didn’t violate the statute himself, maybe they could still nab him for conspiring to violate it.

And here’s where it gets fully Orwellian: In court, the SDNY prosecutors repeatedly argued that their charges against Storm required mere “general intent” to facilitate criminal transactions by people using Tornado Cash, without showing Storm specifically intended to facilitate or cooperate with any particular crime or criminal. But in December 2024, the Biden DOJ quietly asked Congress in a letter to “clarify” the statute to support the interpretation they argued was clear. Unlike similar letters of such weighty effect, the DOJ did not upload this one to its website, leaving crypto advocates to stumble upon it in the cobwebs of the Congressional Record several months later. Needless to say, if the law had already imposed this rule, clarification wouldn’t be needed. But the SDNY wanted to convict Storm under a new interpretation of the law while lobbying Congress to retroactively amend the law to validate that approach. This is not justice; it’s a bait and switch.

The irrationality of the prosecution became even more pronounced earlier this month, when the Department of Justice issued a sweeping policy memo repudiating the very kind of regulatory overreach Storm is being subjected to. The memo ended the Biden DOJ’s campaign of “regulatory weaponization” against digital assets, shut down the National Cryptocurrency Enforcement Team, and directed DOJ prosecutors to stop “superimposing regulatory frameworks” on the space. Crucially, the memo bars prosecutions under Section 1960’s registration prong (one of the central charges being used against Storm) unless prosecutors can show a knowing, willful violation of the registration requirement. The memo couldn’t be clearer: “The Department of Justice is not a digital assets regulator.”

And yet, the Southern District of New York didn’t get the message. As of this writing, the case against Roman Storm still has not been dropped. Until it is, all of crypto and every software developer are at risk.

Storm is not a banker, a broker, or a criminal mastermind. He’s a software developer. Charging him with running a money-laundering enterprise is as absurd as arresting Tim Cook, the CEO of Apple, for one of the likely thousands of crimes committed each day on iPhones. Criminal law demands more than clever theories; it requires fair notice, due process, and actual culpability. Prosecutors are not permitted to peer at a previously-clear federal law and conjure an indictment from between the lines.

In the physical world, questions of liability such as these have been resolved for centuries. As the DeFi Education Fund wrote in its excellent amicus brief filed in Storm’s case, “In general, automobile manufacturers are not liable for drivers who use their vehicles as weapons; construction companies are not liable for businesses that use their office buildings to perpetrate fraud.” Otherwise, inventors wouldn’t dare invent, and manufacturers wouldn’t dare sell their goods if they could be responsible for every crime committed by people using them.

The same concept applies to crypto, open source, and AI, all critical drivers of human flourishing. These technologies would never reach their potential if our legal system established boundless liability for third-party use and abuse. Storm’s prosecution is not an isolated edge case – it’s not even a case “just” about crypto. By pressing their unfounded theories, the SDNY could unwind America’s role as a global technological powerhouse.

To be clear: we support the president’s laudable goal of eliminating Transnational Criminal Organizations. Actual money laundering, especially in support of organized crime and terrorism, should be investigated and prosecuted to the fullest extent of the law. But the government has many effective, legitimate tools at its disposal; inventing new definitions of “money transmission” is not one of them.

The White House has declared the War on Crypto over, and the DOJ agrees. But that message hasn’t yet reached the Southern District of New York. Like the last soldier on a forgotten island, this independent outpost of the DOJ continues fighting a war everyone else has abandoned. It’s time for them to stand down.