DOJ to back off developer prosecutions, what does this mean?

The United States Department of Justice has signaled its intent to scale back enforcement actions against developers, marking a shift from its years-long approach that has targeted several industry members.

Summary

• The DOJ will no longer target software developers for the misuse of their applications by bad actors, provided the developers have no criminal intent.
• Acting Assistant Attorney General Matthew Galeotti confirmed that neutral, non-custodial software will not trigger prosecution under money transmission laws.
• The policy shift responds to concerns raised by the industry over past cases, such as Tornado Cash and Samourai Wallet.

Speaking at the American Innovation Project summit on August 21, acting assistant attorney general for the Justice Department’s criminal division, Matthew Galeotti, shared that authorities will no longer target software developers for the misuse of their applications by bad actors.

According to Galeotti, while prosecutors remain focused on rooting out bad actors from the digital asset industry, developers with clear and neutral intent will not need to fear for their freedom for creating financial tools. 

“Our view is that merely writing code, without ill intent, is not a crime,” he said. Galeotti’s comments follow an April memorandum from Deputy Attorney General Todd Blanche, which outlined the need for prosecutors to end their “Regulation by Enforcement” approach to the industry.

For years, prosecutors have targeted teams like Tornado Cash and Samourai Wallet with charges of unlicensed money transmission and money laundering, criminalizing open-source development by equating code publication with financial crime. 

The new approach now aims to correct that, ensuring that prosecutors no longer bring unfounded charges against developers. 

“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,” Galeotti added.

What the DOJ’s new stance means for the crypto industry

For developers, the acting assistant attorney general’s message is twofold. Neutral, non-custodial software that simply enables transactions should not trigger prosecution, provided there is no intent to support illicit conduct. 

However, Galeotti stressed that fraud, money laundering, sanctions evasion, and scams remain central priorities. Those who intentionally design tools to facilitate crime could still face severe charges, such as money laundering, conspiracy, or aiding-and-abetting. In such cases, prosecutors will ensure to prove intent, rather than simply prosecuting for publishing code.

But beyond the broader impact, the bigger question is what this changing approach means for past prosecutions.

Tornado Cash and Samorai Wallet

Though Galeotti did not cite any relevant cases, the timing of the DOJ’s shift is notable. Earlier this month, Tornado Cash co-founder Roman Storm was convicted on conspiracy charges tied to unlicensed money transmission, after prosecutors unveiled charges in 2022 that the protocol allowed illicit financial activity by sanctioned entities. 

Storm and his co-developers denied knowingly facilitating criminal activity, stressing that the protocols were built to protect user privacy, and once it was deployed, it operated autonomously and outside of their control. Still, prosecutors continued to push for their conviction, resulting the the imprisonment of one of the co-founders last year.

Similarly, the founders of Samourai Wallet pleaded guilty recently to operating an unlicensed money transmitting business, also based on allegations by the DOJ that its mixing features were knowingly designed to launder criminal proceeds.  Industry members have long argued that these high-profile cases set a dangerous precedent, stifling innovation and putting developers at risk.

While it remains unclear whether the new policy will undo past cases, it provides a clearer path going forward that “well-intentioned innovators should not fear for their liberty.”