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In a recent 111-page court filing, federal prosecutors responded to a motion by Tornado Cash co-founder Roman Semenov to dismiss conspiracy and money laundering charges against him.
The government argues that characterizing Semenov's alleged crime as simply writing code obscures his role in promoting and maintaining the Tornado Cash service, even though he knew it was used to launder illicit proceeds from hacks.
The prosecutors movement claims that the Tornado Cash service was a “commercial enterprise operated for profit or financial (sic)” and that Semenov himself profited from its operation by controlling, with others, key components of the service.
The government alleges that while it was possible to directly access the smart contracts powering Tornado Cash, most users relied on the native interface and 98% of users used the optional relay network, which was configured and operated by relays manually listed by Tornado Cash. co-founders until March 2022.
Responding to Semenov's argument that Tornado Cash was not a money transfer business, prosecutors say the service “initiated all of these actions behind the scenes and without any further action on the part of the customer.”
Prosecutors also claim that, based on the basic definitions of Tornado Cash's terms of service, the platform was “moving funds” when executing customer deposits and withdrawals.
The government further alleges that steps taken by Semenov and his co-founder Roman Storm to keep Tornado Cash in operation, such as payments to host the site, payment of gas fees for blockchain transactions, “denial” of implementing appropriate anti-money laundering programs, maintaining the relay network and developing new features to improve anonymity are part of this charged conspiracy.
Prosecutors point out that Semenov himself allegedly admitted that he knew Tornado Cash was being used for illegal purposes, citing a message he sent to the other founders: “Guys, we're screwed.”
Although Tornado Cash developers implemented a user interface change to filter OFAC-sanctioned wallets, the government says this action was insufficient to prevent illicit activities by the Lazarus Group, a northern hacking organization. -Korean.
“Even though they knew the changes to unemployment insurance would be ineffective, they made public statements suggesting they were following the law. Then, despite obtaining confirmation that the UI change was ineffective, Semenov and the Tornado Cash founders took no further action to prevent the Lazarus Group from using the Tornado Cash service to launder money. funds and escape sanctions, which they knew were underway,” the motion detailed.
Pushing back against efforts by cryptocurrency advocacy groups to frame the case as a threat to the freedom to write code, prosecutors say they are pursuing a narrower case that “does not ask the question of what circumstances , if necessary, would give rise to criminal proceedings.” liability for a defendant whose only conduct consisted of writing code for smart contracts which were then deployed on the Ethereum blockchain.
Despite this stance, the government maintained that Tornado Cash's operational logic implied that it required restrictions, pointing to Semenov's alleged transfer of $2.7 million in Tornado Cash profits to unidentified cold wallets. Apparently, this was done through the use of a VPN and a Binance account with a fake identity.
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