US Prosecutors Reject Tornado Cash Founder’s Defense Amid Push For October Retrial

US Southern District of New York (SDNY) prosecutors have pushed back on the Tornado Cash co-founder’s defense, claiming that his arguments for dismissal lack applicability ahead of a crucial hearing later this week.

The Cox case involved a civil liability of an internet service provider for its subscribers engaging in copyright infringement. The Supreme Court found that Cox was not contributorily liable for copyright infringement on its users’ accounts, as it did not induce its users’ infringement nor provide a service tailored to infringement.

“As set forth in detail in the Government’s response to the defendant’s Rule 29 motion— and in contrast to Cox’s robust system for responding to infringement—the defendant intentionally implemented mere half-measures that he said were ‘easy to bypass’ to counter criminal use of the Tornado Cash service, and his purpose in doing so was to distract law enforcement,” the document read.

Clayton added that Storm’s use of the crypto mixer “was window dressing at best and outright misdirection at worst,” as there was no evidence that the Tornado Cash founders put in place effective anti-money-laundering (AML) measures.

It’s worth noting that the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in August 2022 for failing to impose effective controls to prevent malicious actors from laundering funds through the protocol, including $455 million by the North Korea-linked hacking group, Lazarus Group.

For context, Storm was detained and indicted following the Tornado Cash sanctions and charged with conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money-transmitting business.

In September, Storm filed a motion for acquittal, which asks the trial judge to throw out charges or a verdict because the prosecution’s evidence is legally insufficient. The Tornado Cash founder’s lawyers argued that the government never proved he meant to help bad actors launder money through the platform, which would invalidate the grounds for his conviction based on negligent inaction.

Now, prosecutors and Storm’s defense attorneys are scheduled to meet on April 9 for an oral argument on the pending Rule 29 motion, which could shape the course of this key legal battle.