An overview of the court hearing controversy involving Tornado Cash co-founder Roman Storm: How will the case's developments impact DeFi legislation?

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2025-08-15 16:20:29

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The case of Roman Storm may determine the future of the cryptocurrency industry.

Original Title: The Trial That Could Decide The Future of Crypto

Host: David, Bankless

Guests: Jake Chervinsky, Amanda Tuminelli

Compiled & Edited by: Janna, ChainCatcher

Editor's Note:

Roman Storm is a co-founder of Tornado Cash, hailing from Washington, USA. Roman Storm and Roman Semenov were charged with conspiracy to commit money laundering, violating sanctions, and operating an unlicensed money transmission business. In August 2023, Roman Storm was arrested in Washington State and subsequently released on bail.

Roman Storm has been charged by the U.S. Department of Justice with three counts, including money laundering, violating sanctions, and operating an unlicensed money transmission business under Section 1960 of Title 18 of the U.S. Code. The trial outcome at the end of 2024 showed that Storm was convicted on the Section 1960 charge, but the jury was unable to reach a unanimous decision on the more serious charges of money laundering and sanctions evasion.

This article is based on an interview from the Bankless podcast featuring seasoned lawyers in the crypto space, Jake Chervinsky and Amanda Tuminelli, who provided an in-depth analysis of the ruling. This ruling is not only about a single case but also a global issue concerning the maintenance of the openness and sustainable development of blockchain technology.

The following is the dialogue, compiled and organized by ChainCatcher.

TL & DR:

For Storm personally, this is a significant victory, as the jury did not convict him on the more serious charges of money laundering and sanctions evasion; however, for the industry, seeing developers convicted based on money transmission theory is devastating.
The jury's inability to reach a unanimous decision reflects the government's failure to prove the core theory that Storm intentionally assisted in money laundering.
The Section 1960 money transmission charge is more technical, with few litigation cases; the jury may have viewed this as a compromise verdict, acknowledging misconduct but opting for the lesser charge.
There are strong grounds for appeal, including the judge's errors in defining money transmission and weak evidence regarding location; the likelihood of the government retrying the first two charges is low due to a lack of key evidence.
The crypto industry needs to unify in pushing Congress to amend Section 1960 to clarify that those controlling funds are money transmitters; this will permanently protect developers from similar prosecutions.
The Trump administration has delivered on several commitments, such as the passage of the Genius Act, but more focus is needed on market structure legislation; educating Congress on the non-criminal nature of DeFi is crucial.
If the Democrats regain power, the confusion between illegal finance and cybersecurity may persist; building mainstream products is the best defense for normalizing crypto.
The greatest value of blockchains like Ethereum lies in their openness, allowing for diverse innovation; privacy should be seamlessly integrated into all wallets, rather than being an exclusive feature.
Centralized data collection is vulnerable; if breached, it could jeopardize national security; crypto tools protect freedom and autonomy without relying on any entity.

Initial Impressions of the Ruling

David: We are currently in the follow-up discussion of the Roman Storm ruling. Initially, we thought this was the end of the matter, but the reality shows we are still in the process, as Roman clearly stated he would appeal upon leaving the courtroom. Jake, please share your initial reaction to this ruling and the current progress of the Roman Storm case.

Jake: My first reaction is shock that Roman was convicted on any charges. In the U.S., any DeFi developer who merely builds a non-custodial protocol that is exploited by malicious users and cannot control or prevent such use should not face prosecution or imprisonment. This is absurd to me. Therefore, I feel regret about the current situation and the future of DeFi. This outcome is more favorable for Roman personally. He faced three charges: money laundering, violating sanctions, and operating an unlicensed money transmission business under Section 1960. The jury was unable to reach a unanimous decision on the first two charges, which are more serious from a sentencing perspective. The government failed to meet its burden of proof, which is a significant victory. As a result, Roman's maximum statutory sentence is 5 years, rather than potentially decades. In the sentencing phase, the defense can make strong arguments for a sentence far below 5 years, possibly even just probation. For the entire industry, seeing developers convicted based on the government-driven money transmission theory is a devastating outcome. This theory has been proven wrong and poses an existential threat to DeFi.

David: Amanda, please share your thoughts and key points.

Amanda: Jake has covered the main points. I want to add that, as a former criminal defense attorney, I believe the jury's inability to reach a unanimous decision, while not a complete victory, is indeed a success. The jury did not convict Roman on money laundering and sanctions evasion, which are very serious charges and reflect the government's core theory—that is, proving that Roman intentionally assisted in money laundering. However, the government failed to achieve this goal, which is a success for Roman and his team's excellent defense. While Section 1960 has been our long-term focus, it is more technical and legally nuanced. There are few litigation cases for this charge, especially those that go to trial. The jury may have viewed this as a compromise verdict, acknowledging misconduct but choosing to hear the less severe charges. I want to emphasize that this is a significant victory for Roman.

Outcome Assessment: Victory or Success?

David: While this case did not establish a hard precedent, it can be seen as a "soft precedent," meaning developers will not go to jail for writing code. It is reassuring that U.S. software developers can go home to their families instead of being imprisoned. Please respond to my viewpoint, or perhaps I am being overly optimistic.

Jake: I support maintaining a positive attitude, but it is hard to view this as a significant victory because the conviction is based on the act of writing code, and Roman still faces imprisonment. Amanda correctly distinguishes between victory and success; the former implies a certain finality, and this case is not over yet. We are waiting to see if the government will retry the first two charges. If the government is confident there is sufficient evidence showing Roman colluded with malicious conduct, we should have seen that in the first trial. However, due to the lack of key evidence, I believe they are unwilling to retry. Nevertheless, this decision is partially influenced by political factors, and the jury's outcome is unpredictable. The government may choose to retry all three charges. Therefore, the current jury's failure to find that the government met its burden of proof on the first two charges is a success, but the issue is far from resolved.

Analysis of the Possibility of Retrial

David: If the government retried the first two charges, would it be due to a lack of key evidence? If there is no new content, is the retrial merely an attempt to try again for a better outcome?

Amanda: Partially correct, but they could introduce new witnesses. In the first trial, the government made a mistake by calling a witness who claimed their funds flowed into Tornado Cash, but that assertion was debunked. They might avoid similar mistakes and choose better experts for tracking analysis. If they choose to retry, they can restart comprehensively. Personally, I think they will not retry and should feel apprehensive.

David: Is the outcome already determined?

Amanda: Not yet determined. Roman can file Rule 29 and Rule 33 motions. The former seeks a judgment of acquittal, while the latter requests a new trial. Even before an appeal, these motions still have room regarding the conviction under Section 1960. The judge expressed doubts about the stability of the ruling; if not in her court, then in the appellate court. She views Section 1960 as the most interesting issue, which suggests she may acknowledge an error. The government will not decide on a retrial until the motion results are known, as the outcome will affect their choice.

Jake: In typical cases, the government needs several days to weeks to decide. This case is not typical, but the Speedy Trial Act requires a retrial within 70 days, although it can be delayed. We will not be waiting long.

Controversy Over Section 1960 Money Transmission

David: Let’s focus on the Section 1960 issue. This topic is at the core of our struggle in the crypto industry, ensuring that software developers, smart contract developers, and node operators do not need to register as money transmitters. The essence of blockchain is for asset ledgers; if any interaction is deemed money transmission, the entire industry will be criminalized. This is incompatible with the spirit of the industry. Roman was merely uploading code to Ethereum and was charged; this outcome is devastating.

Jake: For those who have not been closely following, this is a wake-up call. Section 1960 requires money transmitters to register with FinCEN and comply with anti-money laundering regulations, and its definition requires control over customer funds. We wrote a 40-page analysis to support this point. FinCEN clearly guided DeFi in 2019, and the DOJ's 2020 framework also recognized this. Roman followed this guidance. However, the Biden administration sanctioned Tornado Cash and prosecuted developers for political motives rather than legal changes. The DOJ reversed the definition, claiming that "facilitating transactions" is sufficient without the need for control. This theory is placed in the motion to dismiss, claiming Roman should have known or was ignorant and is thus responsible. This injustice threatens all non-custodial protocol developers. The jury was bound by the judge's instructions, who accepted the government's theory, making conviction easy to appeal or overturn post-trial motions.

Amanda: Jake has elaborated. The judge did not include the requirement for custody or control in the jury instructions, so the jury did not consider it. This point is suitable for appeal, challenging the instructions and the government's argument.

Appeal Prospects and Optimistic Views

David: You both view the outcome as negative for DeFi but emphasize that the grounds for appeal are strong. Roman has stated he will appeal and is in good spirits. This makes me feel optimistic, even though I am not a lawyer. Please temper my viewpoint and point out my naivety. While we are at a disadvantage, the prospects are promising.

Jake: Disclaimer: I am not the audience's lawyer, and this is not legal advice. I agree that the grounds for appeal are strong. First, the judge erred on the core issue: whether non-custodial protocols constitute money transmission. If the Second Circuit clarifies the definition, it will benefit Roman and the entire industry, although it is not as comprehensive as legislation. That is not the only reason.

Amanda: Another key point is the location. The government must prosecute in the geographic area related to the crime; the evidence in this case is weak, with only Roman texting someone in Manhattan. The defense challenged this multiple times, and this point is well-preserved and easiest to overturn the conviction. Most importantly, it is Roman's feeling. If he feels supported and motivated, we will fully assist him in challenging.

Precedent Strength and Impact

David: Roman needs community support to fight the DOJ. The precedent in this case is weak, and an appeal could go to the Second Circuit, enhancing the strength of the precedent. Please explain how precedents are established and their strength.

Amanda: Precedents are divided into binding and persuasive. The Supreme Court sets the most binding precedents. District courts, like this case, provide the lowest persuasive precedents, serving only as references for other courts in the Southern District of New York. The judge did not issue a written decision, making it harder to cite. If the appeal goes to the Second Circuit and wins, that definition becomes binding precedent for lower courts. Each level of elevation increases the strength of the precedent.

Future Procedures and Ideal Outcomes

David: Assuming Roman appeals the Section 1960 conviction, what are the next procedures? If he wins, what would the outcome be? Please balance the discussion.

Amanda: The judge sets deadlines for Rule 29 (judgment of acquittal) and Rule 33 (new trial) motions. After submission, the government opposes, Roman replies, and the judge decides. If the conviction stands, then sentencing follows, and then an appeal to the Second Circuit. I hope the motions succeed and overturn the conviction. Roman claims a 99.9% success rate for the appeal; I see it as higher than 50%, more likely to succeed.

Jake: Ideally: the government does not retry money laundering and sanctions; the 1960 charges are dismissed or the president grants clemency; Congress amends Section 1960 to clarify the need for control over funds. This would protect the industry from similar future issues. Anything is possible if the industry unites. The president wants to make the U.S. the crypto capital; we must push for that.

David: This case is returning control to the industry. We have political influence to change the outcome. Amanda, do you nod in agreement?

Amanda: Indeed. We can call senators and request that the market structure bill includes developer protections. Proposals like the DeFi education fund include amendments to Section 1960. We need to unify to ensure the bill protects developers building neutral tools rather than illegal finance.

Current Status of Regulatory Bills

David: What is the status of the Clarity Act and RFIA?

Amanda: Clarity is the market structure version passed by the House, now in the Senate. RFIA is a draft under discussion in the Senate and is still being refined. Both include blockchain regulatory certainty provisions to protect developers. However, the Senate version lacks the protections for decentralized finance activities found in Clarity. We need to push for inclusion. The Senate has released a simplified version, aiming to gather feedback. Based on different foundations, we emphasize the need for supportive protections.

David: If Congress passes a bill including protections, this would parallel Roman's appeal. Even with legislation, Roman would still need to appeal to overturn the conviction. Please clarify.

Jake: Congress cannot directly overturn a conviction, but if it clarifies retroactively, the appellate court may view the original conviction as flawed. This is not the most direct path. The DOJ could dismiss the conviction or issue guidance defining money transmission as requiring control over funds. This distinguishes the Biden DOJ's actions.

Amanda: It is the Biden DOJ that prosecuted. If the Trump DOJ wanted to draw a line, it could veto. The momentum of this case stems from the previous administration, but it can now shift to support making the U.S. a crypto hub.

David: We have three paths: congressional legislation, Roman's appeal, and the DOJ stepping back. Legislation and a successful appeal would create a dual-layer precedent, the best outcome.

Evaluation of the Trump Administration

David: The Trump administration has led the crypto space for 8 months; how do you evaluate its fulfillment of commitments to crypto?

Amanda: The administration has delivered on many commitments, such as executive orders, presidential task force reports, stablecoins, and the passage of the Genius Act—this is the first crypto law. The focus has been sufficient, but more progress is needed on market structure and protections. Educating congressional members to understand that DeFi is not a criminal tool is crucial.

Jake: I agree with this perspective. The current atmosphere is far better than a year ago during the Gensler era. Institutional progress is significant, such as the SEC's Project Crypto. However, the White House has not focused on progress in areas like money transmission. We need legislative protections to prevent future government influence.

Future Political Uncertainty

David: If the Democrats return to power in 2028 and hostility remains, what scenarios might arise?

Amanda: Not just in 2028; the composition of Congress may change in next year's midterm elections. We educate across party lines, but confusion between illegal finance and cybersecurity still exists. The focus is overly on a small part of DeFi as illegal finance. We strive to distinguish, but challenges remain.

Jake: If the Democrats regain control of the House, market structure legislation will be difficult to complete, leaving no legislative protections for the next administration. The outcome depends on the president's views. If the industry builds mainstream products, it will be the best defense. If it is limited to Bitcoin, stablecoins, and meme coins, the situation is concerning.

Call to Action for the Industry

David: If the stakes of the midterm elections are significant, what actions can we take?

Amanda: We can vote and support pro-crypto candidates. We can call representatives to emphasize economic contributions. We can seek meetings or contact organizations like the DeFi education fund and the Blockchain Association. This is a critical time, and participation is essential.

Jake: We can support the DeFi education fund and fund Roman's defense. Let’s not forget Alexey Pertsev from the Dutch appeal; he also needs support.

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