Tornado Cash Founder Convicted for Unlicensed Money Service
Tornado Cash co-founder Roman Storm has been convicted by a US federal jury in the Southern District of New York for operating an unlicensed money transmitting service, while jurors deadlocked on charges of conspiracy to commit money laundering and violating North Korea sanctions. The 2023 DOJ lawsuit, overseen by Judge Katherine Polk Failla, alleges Storm’s protocol facilitated laundering over $1 billion—including funds tied to North Korea’s Lazarus Group. Prosecutors argued Storm knowingly profited from illicit use of Tornado Cash; Storm’s defense denied any intent to enable criminal activity. The split verdict underscores the risks faced by DeFi developers operating an unlicensed money transmitting service, with the DOJ indicating it may refile unresolved money laundering and sanctions charges. Legal experts warn the case signals broad federal risks for privacy-focused protocols, and the DeFi Education Fund argues non-custodial developers should not be treated as money services businesses.
Bearish
The conviction for operating an unlicensed money transmitting service, combined with deadlocked money laundering and sanctions charges, heightens legal uncertainty around Tornado Cash. In the short term, users and liquidity providers may withdraw funds to mitigate regulatory risk, reducing protocol activity. Long term, the potential refiling of charges and broad federal scrutiny on privacy-focused DeFi projects could deter new users and developers, undermining growth and innovation. This sustained legal pressure is likely to weaken market confidence and usage, resulting in a bearish outlook for Tornado Cash.