Verdict against Tornado Cash raises legal alarm in DeFi

• Roman Storm's conviction worries DeFi developers
• Cryptocurrency privacy at risk after court ruling
• Money laundering cases put pressure on decentralized protocols

The recent conviction of Roman Storm, co-founder of the Tornado Cash protocol, has intensified the debate over the legal risks faced by developers in the decentralized finance (DeFi) sector, especially in privacy-focused projects. The trial, held in New York, found Storm guilty of conspiring to operate an unlicensed money transfer business. Two other charges—sanctions violations and money laundering—have not been finalized.

According to prosecutors, the platform was allegedly used to move illicit funds, despite being presented as a resource to protect users' privacy. Authorities claim that more than $1 billion circulated through Tornado Cash, including funds attributed to the Lazarus Group, a hacking group linked to North Korea. Co-founder Roman Semenov was sanctioned in 2022 and remains at large.

Experts believe this court ruling could lead privacy projects to adopt practices such as mandatory user identification and transaction monitoring, which goes against the essence of decentralized protocols. For Kadan Stadelmann, CTO of Komodo Platform, "Roman Storm built a privacy tool, not a criminal empire. The real problem is that privacy itself is being framed as a threat."

The impact could go beyond cryptocurrencies. Brandon Ferrick, a Pyth Network contributor, warned that such a precedent "could stifle innovation" and affect software developers across a wide range of industries. Jason Rozovsky, legal director at Interop Labs, stated that the decision highlights authorities' lack of understanding of how decentralized solutions work and advocated for a regulatory approach more tailored to the sector.

The case also drew comparisons with Ross Ulbricht, the creator of Silk Road, who received a life sentence before being pardoned by current US President Donald Trump. For Stadelmann, both cases reveal a tendency to use individuals as examples to restrict technologies still poorly understood by the government.

Storm is free awaiting sentencing and could face up to five years in prison. The defense intends to appeal, while the Department of Justice considers whether to retry the charges that remained unconfirmed, a decision that could directly influence the development of privacy solutions in DeFi.