Cryptocurrency developers around the world are facing legal problems. But why?
The developers of the Tornado Cash platform could face liability if the code they wrote was used “solely for the purpose” of committing crimes or supporting criminals. This statement was made the day before by representatives of the Dutch Fiscal Information and Investigation Service (FIOD), which had previously arrested one of the developers of Tornado Cash. The FIOD’s comments could, in theory, set a precedent for prosecuting even other blockchain platform programmers. We tell you more about what’s going on.
As a reminder, the US Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash for using the cryptomixer in money laundering, with the wording being direct and open. A little later, a member of the platform's team was arrested in the Netherlands.
Although FIOD has yet to disclose his identity, it is widely rumoured to be Alexey Pertsev. His detention has sparked a wave of outrage in the cryptocurrency community, with many claiming that Pertsev was simply developing the platform and can’t be held fully responsible for the allegations against Tornado Cash. In other words, he – like others at the cryptocurrency mixer – shouldn’t be responsible for the way other people interacted with the platform.
Tornado Cash cryptocurrency mixer
However, such a version does not suit the authorities. Moreover, the current activity of officials and representatives of various agencies, in theory, threatens other developers who are involved in blockchain projects.
What can crypto-project developers be jailed for?
Information about the arrestee’s responsibility was voiced by a FIOD representative in an interview with lawyers from the human rights group DeFi Education Fund. Here’s his response to a question about the specific charges against Pertsev, cited by CryptoSlate.
I cannot confirm the name you mentioned. If you are referring to the man arrested on Wednesday I can tell you that he is suspected of concealing criminal financial flows and money laundering.
Comments from FIOD released by DeFi Education Fund representatives
Furthermore, FIOD said that their investigation is independent from OFAC, meaning that the US government supposedly has no influence on the process. In any case, this is already alarming news for many developers in the blockchain industry, where the emphasis is on decentralisation and anonymity. As a reminder, Tornado Cash is not inherently a fraudulent scheme or anything like that – it is simply a tool to increase transaction privacy. And it is up to users to decide how to interact with the tool.
That’s also the opinion of the lawyers at DeFi Education Fund. Here’s their rejoinder.
The Tornado Cash platform has regularly been used for legitimate purposes. While we are still waiting for specific charges to be announced against the developer, one thing should remain clear. Writing and publishing code should be protected in free societies, and privacy is not a crime.
Volumes of money laundering through Tornado Cash
If the arrested Pertsev is found guilty at trial, it would unleash many financial regulators. They might just start going after independent developers around the world to put pressure on various crypto platforms. That’s why FIOD’s arrest has sparked such outrage from the cryptocurrency community, with many industry luminaries even joining in the criticism of the body’s actions. Among them is the CEO of cryptocurrency exchange Kraken, Jesse Powell.
Kraken CEO Jesse Powell
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In an interview with Bloomberg, Powell said that “people have a right to financial privacy,” according to Decrypt. He’s also optimistic about appealing OFAC sanctions against Tornado Cash, as they allegedly won’t stand up to pressure in court. According to the Kraken executive, the campaign against Tornado Cash is a “hot reaction” to the collapse of the Terra ecosystem, which has led to multi-billion dollar losses among investors.
Other critics of the sanctions include Hayden Adams, creator of decentralised trading platform Uniswap. He called the sanctions “a threat to free speech”, referring to a 1996 federal court case called Bernstein v. United States, which found that “source code is speech” protected by the First Amendment.
Hayden Adams’ LinkedIn profile
Much of the denouement of this confrontation now depends on FIOD’s actions regarding Pertsev. If no serious charges are found against the developer, the outcome could be considered satisfactory for the digital asset market.
We believe that the situation with representatives of the Tornado Cash project was indeed unfair. As numerous analysts and simply representatives of the blockchain industry reiterate, the mixer is not a tool for crime and privacy is not outlawed. In this case, the developers should not be responsible for the way other people interacted with their brainchild. The responsibility for this lies solely with the latter.
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