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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 crimes as simply writing code obscures Semenov’s role in promoting and maintaining the Tornado Cash service. Even though Semenov knew it would be used to launder illegal proceeds from the hack.
The prosecution’s motion alleges that the Tornado Cash service is a “commercial enterprise carried on for profit or financial gain” and that Semenov himself, along with others, profited from the operation of the service by controlling key components of the service.
Although it was possible for governments to access the smart contracts supporting Tornado Cash directly, most users relied on the default interface, and 98% of users used Tornado Cash through an optional relay network set up and operated by manually whitelisted relayers. They claim to have used it. Co-founder until March 2022.
In response to Semenov’s claim that Tornado Cash was not in the business of transferring money, prosecutors allege that the service “made all of these actions happen behind the scenes without any further action from customers.”
The prosecution also claimed that, according to the basic definition of Tornado Cash’s terms and conditions, the platform carried out a ‘fund transfer’ while executing customer deposits and withdrawals.
The government also ordered Semenov and his co-founder Roman Storm to keep Tornado Cash running, including paying site hosting fees, paying gas fees for blockchain transactions, and “refusing” to implement and maintain appropriate anti-money laundering programs. It is claimed that he took . Building a network of intermediaries and developing new features to enhance anonymity are part of the accused conspiracy.
Prosecutors pointed out that Semenov himself acknowledged that Tornado Cash was being used for illegal purposes, citing messages he sent to other entrepreneurs.
Tornado Cash developers have implemented UI changes to filter out OFAC-approved wallets, but the government claims the measures are not enough to prevent the illegal activities of North Korean hacking group Lazarus Group.
“They made public statements implying they were complying with the law even though they knew their UI changes were not effective. Then, despite receiving confirmation that the UI changes were not effective, Semenov and the Tornado Cash founders took no further action to prevent the Lazarus Group from continuing to use the Tornado Cash Service to launder funds and evade sanctions, and that these actions I knew it was going on.” detailed.
Prosecutors pushed back on efforts by cryptocurrency advocacy groups to frame the case as a threat to the freedom to code, saying they were “pursuing a narrower case that does not pose questions about under what circumstances a crime can occur.” “He claims. Liability lies with defendants whose sole act was to write code for smart contracts deployed on the Ethereum blockchain.”
Despite this position, the government argued that Tornado Cash’s operating logic implied that restrictions were necessary, and claimed that Semenov transferred $2.7 million in Tornado Cash profits to unidentified cold wallets. This is believed to have been done using a VPN and Binance accounts with false identities.
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