Devs behind ‘truly decentralised’ protocols won’t face DoJ prosecution, official says

Weeks after Tornado Cash co-founder Roman Storm was convicted on a money transmission charge, a Department of Justice official said the agency would reject similar charges going forward.

“Where the evidence shows that software is truly decentralised and solely automates peer to peer transactions, and where a third-party does not have custody and control over user assets, new [money transmission] charges against a third party will not be approved,” Matthew Galeotti, acting assistant attorney general of the department’s Justice Criminal Division, said Thursday.

“If criminal intent is present, other charges may be appropriate.”

Galeotti was speaking at the American Innovation Project Summit in Jackson, Wyoming. The AIP is a nonprofit that launched earlier this week with support from several crypto companies and advocacy groups, including Coinbase and Uniswap Labs.

“The fact the DOJ acknowledged that software developers should not be held responsible for third party’s misuse of their code affirms what we have bee advocating for years,” Amanda Tuminelli, executive director of crypto advocacy firm DeFi Education Fund, said in a statement. Tuminelli introduced Galeotti at the conference.

Galeotti’s comments address one of the industry’s chief concerns: prosecutors’ ability to bring charges against software developers who build applications that were later used by cybercriminals seeking to launder stolen crypto.

Storm, the Tornado Cash developer, said his protocol was developed to provide privacy on Ethereum and other blockchains.

But Tornado Cash became popular with cybercriminals, including hackers affiliated with North Korea, who used the protocol to launder more than $500 million in crypto stolen in 2022.

Last month, Storm’s criminal trial began in New York. Storm was facing charges of conspiracy to launder money, evade sanctions, and operate an unlicensed money transmitting business.

The money transmission charge alarmed the industry. Storm’s supporters said that it misunderstood the way Tornado Cash works and that a conviction would chill the development of privacy-preserving software.

Early this month, jurors convicted Storm on the money transmission charge, but could not reach a unanimous decision on the money laundering and sanctions evasion charges. Prosecutors could choose to retry Storm on both counts.

It was not immediately clear whether Galeotti’s announcement would have protected Storm from the charges he faced in his criminal trial.

Although the industry held that Tornado Cash never took custody of user funds and was fully decentralised — in other words, that Storm was powerless to stop hackers from using the protocol — prosecutors argued Storm in reality exercised meaningful control.

Nevertheless, crypto policy experts celebrated Galeotti’s announcement Thursday.

“For too long, crypto and open source developers in the US have been living under a cloud of doubt,” Katie Biber, chief legal officer at crypto venture firm Paradigm, wrote on X.

“That uncertainty ends today, with an emphatic statement from the DOJ that *shipping code is not a crime.*”

The announcement builds on a Justice Department memo issued before Storm’s trial began in July.

In a four-page memo published in April, the department said it no longer intends to pursue cases in which it charges crypto mixers “for the acts of their end users or unwitting violations of regulations.”

In a footnote, however, the department said it was not changing its guidance in cases where business owners know they’re handling dirty money — exactly the argument that prosecutors made in Storm’s trial.

Galeotti doubled down on that sentiment Thursday.

“Our view is that merely writing code without ill intent is not a crime,” Galeotti said. “Innovating new ways for the economy to store and transmit value and create wealth without ill intent is not a crime. The criminal division will, however, continue to prosecute those who willingly commit crimes.”

Aleks Gilbert is DL News’ New York-based DeFi reporter. You can reach him at [e-mail].