The Solana Policy Institute (SPI) has pledged $500,000 to the legal defense of Tornado Cash developers Roman Storm and Alexey Pertsev, according to an Aug. 28 statement.

Storm and Pertsev helped create Tornado Cash, an Ethereum-based privacy protocol that allows crypto transactions to be mixed and anonymized. After deployment, the developers relinquished control of the smart contracts, leaving the system to run without centralized oversight.

Developers held liable

Courts in the Netherlands and the US have held the developers liable for malicious actors’ use of the platform for their illicit activities.

Pertsev was convicted of money laundering in 2024, while Storm was found guilty earlier this month of conspiring to operate an unlicensed money-transmitting business.

These convictions have elicited strong responses from the crypto community, which argues that the Tornado Cash developers’ conviction misinterprets how blockchain protocols function.

Industry experts argue that developers cannot monitor or restrict usage of their protocols once the open-source code is published and immutable.

Notably, the SPI echoed this view, warning that holding coders responsible for third-party activity establishes a precedent that threatens innovation across the entire software industry.

Kristin Smith, the President of the Solana Policy Institute, said:

“Privacy is normal. Code is speech. And at Solana Institute, we’ll continue to defend the rights of software developers everywhere.”

Solana welcomes ‘Tornado Cash-like’ protocol

The SPI donation comes as Solana welcomes the launch of a Tornado Cash–style platform on its network.

On Aug. 27, Privacy Cash went live on the network, offering users a way to transfer digital assets into new wallets without linking prior addresses or transaction histories.

Mert Mumtaz, CEO of Helius Labs, said the tool’s design mirrors Tornado Cash’s but benefits from Solana’s performance and integrated block explorers.

According to him, combining the protocol with Solana’s infrastructure—and even bridging to privacy-focused assets like Zcash—gives users a pathway to near-total anonymity.

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The Ethereum Foundation (EF) has pledged to donate up to $500,000 to Tornado Cash’s co-founder, Roman Storm, to support his ongoing legal defense. This follows the recent trial verdict that found Storm guilty of one of three charges.

Ethereum Foundation Supports Tornado Cash’s Co-Founder

On Thursday, the Free Pertsev and Storm fundraiser revealed that the Ethereum Foundation will match donations up to $500,000 to support the Tornado Cash co-founder’s legal defense following this week’s verdict.

In an X post, the fundraiser’s team explained that they “will need these funds and more to continue the fight for Roman at the trial court and on appeal. The outcome of these proceedings will set major precedent for developers worldwide.”

As reported by Bitcoinist, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in August 2022 for failing to impose effective controls to prevent malicious actors from laundering funds through the protocol, including $455 million by the North Korea-linked hacking group, Lazarus Group.

Storm was detained and indicted following the Tornado Cash sanctions and charged with conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money-transmitting business.

On August 6, the verdict of the long-awaited trial, which started on July 14 after being delayed twice, was announced. Notably, the jury was unable to come to a unanimous decision regarding two of the three charges: conspiracy to commit money laundering and conspiracy to commit sanctions violations.

Nonetheless, the jury found the Tornado Cash co-founder guilty of the remaining charge: conspiracy to operate an unlicensed money transmitting business, which could lead to a 5-year conviction for the crypto mixer’s co-founder.

After the verdict, he told journalist Elenor Terret that the verdict was “a big win. The ‘1960’ charge is bullshit and we’re going to fight it all the way. You know how President Trump said ‘fight, fight, fight’? We’ll do that too.”

As the Free Pertsev and Storm team detailed, “Roman risks up to 5 years of jail time if he doesn’t win the appeal, and potentially decades if the government decides to retry Counts 1 & 3.”

What’s Next For Storm’s Defense?

Unchained host and journalist Laura Shin interviewed former prosecutor Sam Enzer to discuss the mixed verdict and what’s next for the Tornado Cash co-founder. Enzer noted that before getting to appeal, “Roman gets to move for a new trial or a judgment of a quibble.” After that, “there will be a briefing on that. The court, Judge Failla will rule.”

As the former prosecutors explained, if the Judge rules that the conviction was proper on the conspiracy to operate an unlicensed money transmitting business count, they could proceed to sentencing. Additionally, the government could retry Storm on the two counts for which the jury was hung.

So, it is possible that they could be retried, or the judge could say, I think the conviction was inappropriate, and could say that on the counts that the jury hung on, those should have been acquitted.

Enzer asserted that if either of these “extreme” outcomes happens, the case could go on appeal after making its way through the district court, adding that “who appeals will depend on what the outcome is. If the government’s upset with the outcome, it’ll be them appealing. If Roman’s upset with the outcome, he’ll be appealing.”

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Dragonfly managing partner Haseeb Qureshi revealed that the U.S. Department of Justice (DOJ) will not bring criminal charges against the crypto venture firm, as Tornado Cash co‑founder Roman Storm’s federal trial in Manhattan neared its conclusion.

Qureshi, whose investment firm backed several blockchain startups, wrote on social media that federal prosecutor Nathan Rehn told the court July 28 that neither Dragonfly nor its principals were targets of the department’s investigation.

He called the public clarification “unprecedented” and “a clear violation of DOJ policy,” citing the Justice Department’s usual practice of keeping target information confidential. The development comes days after Qureshi publicly denounced the DOJ over targeting the firm for backing Tornado Cash in 2020 as part of Storm’s trial.

Storm, who co‑founded Tornado Cash in 2019 as an open‑source protocol to anonymize cryptocurrency transactions, is charged with laundering more than $1 billion and violating U.S. sanctions against North Korea’s Lazarus Group.

The trial, which began July 14 in U.S. District Court in Manhattan, has heard testimony from blockchain tracing experts and former Tornado Cash users. Closing arguments are expected later this week.

Tornado Cash was added to the U.S. Treasury Department’s sanctions list in August 2022, marking the first time a software protocol faced such action. Prosecutors allege Storm personally approved transactions for illicit actors, while defense attorneys argue that the protocol’s code, not its creator, should be judged.

Dragonfly invested in Tornado Cash in 2020 after obtaining an outside legal opinion that the mixer complied with U.S. anti‑money‑laundering guidance issued by the Financial Crimes Enforcement Network (FinCEN).

The outcome of Storm’s case could reshape how open‑source developers are held accountable for user activity. If convicted, Storm faces up to 45 years in prison, a sentence that critics warn could chill innovation in privacy‑enhancing tools.

Qureshi wrote:

“With that behind us, the focus should remain on Roman Storm’s trial, which is now nearing closing arguments as soon as this week. Its outcome will have massive implications for open-source software and privacy rights in America.”

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Crypto Journalist

Amin Ayan

Crypto Journalist

Amin Ayan

About Author

Amin Ayan is a crypto journalist with over four years of experience in the industry. He has contributed to leading publications such as Cryptonews, Investing.com, 99Bitcoins, and 24/7 Wall St. He has…

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July 26, 2025

Dragonfly Capital may soon find itself in the crosshairs of U.S. prosecutors over its 2020 investment in Tornado Cash developer PepperSec, Inc., the firm behind the now-sanctioned crypto privacy protocol.

The venture capital firm signaled Friday that it would push back hard if formal charges are filed.

In a statement on social media, Dragonfly managing partner Haseeb Qureshi defended the investment, stressing that it was made in good faith after receiving legal assurances of compliance.

“We made this investment because we believe in the importance of open-source privacy-preserving technology,” Qureshi wrote. He added that legal counsel at the time found no regulatory red flags.

US Crackdown on Tornado Cash Sparks Crypto Privacy Debate

The controversy stems from the US government’s crackdown on Tornado Cash, a tool that enables users to obscure the origin and destination of crypto transactions.

Though the protocol was pitched as a decentralized privacy enhancer, it became a favorite among hackers and sanctioned entities seeking to hide digital footprints.

In 2023, the Department of Justice charged developers Roman Storm and Roman Semenov with money laundering and violating U.S. sanctions.

Storm’s trial is currently underway in New York and could result in a decades-long prison sentence. On Friday, prosecutors suggested Dragonfly itself could be next.

Qureshi dismissed the notion as an intimidation tactic. “We believe the government’s statement in court today was primarily to undermine a defense of Tornado Cash,” he said. “Bringing charges now would be outrageous.”

Tornado Cash has remained a legal and ethical flashpoint in the debate over privacy and regulation in crypto.

Its sanctioning by the U.S. Treasury’s OFAC in 2022 was a landmark moment, with authorities alleging it facilitated billions in illicit transactions, including funds tied to North Korean hackers.

Despite the sanctions, Tornado Cash has shown surprising resilience. Flipside Crypto reported $1.9 billion in deposits through the platform in the first half of 2024, indicating continued demand for anonymity tools in blockchain transactions.

No Final Ruling Needed After Tornado Cash Removed from Sanctions List

In March, the US Treasury Department argued that no further court ruling is necessary in the legal battle over its sanctioning of crypto mixer Tornado Cash, citing its recent removal of the platform and associated addresses from the sanctions list.

As reported, a developer has ported Tornado Cash to the MegaETH blockchain’s public testnet, enabling private transactions on the high-performance network.

MegaETH, which recently launched, boasts a throughput capacity of up to 20,000 transactions per second.

The developer, known pseudonymously as Gunboats, said the idea was sparked by the U.S. Treasury’s recent removal of Tornado Cash addresses from the OFAC sanctions list, following a court ruling earlier this year.

Venture capital firm Dragonfly said Friday that the U.S. government is weighing potential charges over its 2020 investment in PepperSec, the developer of Tornado Cash, marking a rare instance where federal prosecutors may target a venture investor for backing a crypto project.

In a detailed statement, Dragonfly managing partner Haseeb Qureshi called the prospect of such charges “outrageous” and legally unfounded.

He said the firm invested in PepperSec in August 2020 after securing an independent legal opinion that confirmed Tornado Cash, as designed, complied with federal guidance issued by the Financial Crimes Enforcement Network (FinCEN) in 2019.

Qureshi further stated that Dragonfly believed strongly in supporting open-source privacy-preserving technologies and continues to stand by that investment.

The development comes days after the prosecution faced a setback in developer Roman Storm’s trial after the FBI failed to connect funds stolen from a key witness to Tornado Cash.

Tornado Cash, launched in 2019, is a decentralized protocol that mixes cryptocurrency transactions to obscure sender and recipient details. The tool, while valued by privacy advocates, has been accused by U.S. authorities of facilitating money laundering for hacking groups, including North Korea’s Lazarus Group.

The Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in 2022, but subsequent court challenges forced the government to scale back certain aspects of its sanctions, a development Dragonfly cited as proof of the protocol’s legal standing.

Qureshi said that Dragonfly neither operated Tornado Cash nor had any contact with illicit users, emphasizing that it offered PepperSec the same level of guidance it provides to all portfolio companies.

He also revealed that the firm fully complied with a Department of Justice subpoena issued in 2023 and was told it is not a direct target of the ongoing investigation.

According to Qureshi, the government’s mention of Dragonfly during a recent court proceeding was an attempt to weaken Tornado Cash’s defense, potentially by complicating testimony from Dragonfly co-founder Tom Schmidt.

He argued that prosecuting an investor over the conduct of a portfolio company years after the fact would have a chilling effect on venture funding for privacy technologies and blockchain innovation.

Dragonfly’s statement comes amid heightened enforcement efforts against crypto privacy tools, which regulators view as a growing risk for illicit finance. The firm said it remains confident that the DOJ will not pursue charges, but it pledged to “vigorously defend” itself if necessary.

Testimony regarding the fact that some of the stolen funds from IRS Special Agent Stephen George’s Hanfen Lin had been placed in tornado cash seemed reliable enough to prevent the defense from filing a claim of tort.

On Monday, the defense of the tornado cash trial came to mind to file a motion for the Miss Trial after saying that FBI special agent Joel DeCapua had not tracked the tracking of funds stolen from the case’s first witness to Tornado Cash Mixing Services.

However, after today’s testimony from IRS special agent Stephen George, the second witness, the second witness who prosecutors sought training to track assets on public blockchains, seems slim at best to file a complaint of dispute.

Special Agent George hired the accounting principals from LIFO (last, first out) that included Etherscan.io (Ethereum’s Block Explorer), Chainalysis’ Reactor, and TRM Labs, and spoke about how they used the TRM Lab to track stolen funds.

According to data from special agent George, approximately 149,000 USDT was sent from Lynn’s crypto.com account through a series of wallets. About a third of this amount was exchanged for 9.78 ETH (worth around $47,000 at the time) before moving the Tornado Cash on November 15th, 2021.

Special Agent George admitted that, according to initial disclosures from prosecutors, he was not tasked with tracking these stolen funds from crypto.com to tornado cash, but began to do so at the end of June or early July this year.

This defense was thorough in cross-examination of special agent George, but it seemed to struggle to find holes in his story and the notable flaws in the analytical process.

Special Agent George admitted that his analysis may not have been perfect, but said that the results of his analysis using chain analysis and tracing tools from TRM Labs independently produced similar results.

That being said, the defense shared that he plans to complete Cross Agent Special Agent George at the beginning of tomorrow’s trial.

So, there is still a possibility that he could find a way to trust some of the data he presented, but based on today’s cross-examination, it doesn’t seem possible.

See this thread in X for a more detailed explanation of what happened in court today.