Roman Storm, founder of Tornado Cash, was convicted of operating an unlicensed cryptocurrency money transfer service despite never having controlled user funds, causing deep controversy within the cryptocurrency legal community.
This verdict raises significant concerns about the future of DeFi protocols, especially as many experts believe Storm should appeal because he did not directly control user assets.
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Roman Storm was convicted of operating Tornado Cash as an unlicensed money transfer service.
Many experts and major organizations believe Storm did not control user funds and recommend appealing the verdict.
The case sets a controversial precedent regarding the boundary of responsibility for decentralized protocol developers.
Who is Roman Storm?
Roman Storm is a co-founder of Tornado Cash, a cryptocurrency mixing protocol focused on privacy, playing an important role in the DeFi sector.
Roman Storm emerged due to his role in developing Tornado Cash, one of the widely used applications to conceal transactions on the Ethereum Blockchain. His involvement has greatly contributed to the field of privacy protection on the Blockchain, but has also placed him at the center of international legal debates.
Storm's arrest in August 2023 shocked the cryptocurrency community and triggered a series of debates about the boundary of responsibility between software developers and end-user behavior. According to an AMBCrypto report in August 2025, Storm faces serious charges from the U.S. Department of Justice related to Tornado Cash's operations.
What is Tornado Cash?
Tornado Cash is a decentralized cryptocurrency mixing protocol that allows users to conceal transaction traces using Smart Contract technology on the Ethereum Blockchain.
Tornado Cash allows users to anonymize transactions by mixing the origins of Tokens within the same Pool, making it nearly impossible to trace the flow of funds. This protocol does not maintain control over assets and operates entirely automatically, without storing user funds.
The most notable advantage of Tornado Cash is its robust privacy protection mechanism, but it is also a point criticized by many legal authorities for being abused by bad actors to carry out cryptocurrency money laundering transactions.
"The speed, efficiency, and functionality of Stablecoin and other digital assets offer much promise, but cannot be an excuse for illegal activities."
Jay Clayton, U.S. Attorney, Southern District of New York, DoJ statement, August 2025 [Source: U.S. Department of Justice]
What charges has Roman Storm been accused of?
Roman Storm was convicted of operating Tornado Cash as an unlicensed cryptocurrency money transfer service, according to allegations from the U.S. Department of Justice, violating strict financial operation regulations.
The indictment emphasizes that Storm and the co-founders profited over $12 million, mostly from over $1 billion in illegal cryptocurrency transactions, primarily conducted by North Korean hacker groups.
According to investigations, Tornado Cash was used in many criminal events, notably the North Korean hacker laundering $600 million after the Axie Infinity attack. These factors became the focal point of the verdict and the basis for the court's conclusion that Storm violated unlicensed money transfer laws (Section 1960).
What makes Roman Storm's sentence highly controversial?
The verdict against Roman Storm is controversial as many experts argue that he did not control user funds, only developing a decentralized protocol that does not store assets.
Legal experts argue that Section 1960 regarding unlicensed money transfers was designed for intermediary organizations controlling assets, which does not fit the model of decentralized protocols like Tornado Cash. According to Jake Chervinsky, Legal Director of Variant Fund, Storm is a developer, not an organization holding customer assets, and thus should not be subjected to this law.
"Section 1960 should not apply to decentralized protocol developers who do not control user assets. This case should be appealed to a higher court."
Jake Chervinsky, Legal Director, Variant Fund, August 2025 [Source: X (Twitter)]
Many major organizations in the industry, such as Coin Center and DeFi Education Fund, have expressed disappointment with the ruling and affirmed that they will support Storm's appeal, as technology developers cannot be held responsible for all criminal acts of users.
"We are disappointed that the jury did not recognize that Storm cannot be held responsible for the actions of third parties beyond his control."
Representative from DeFi Education Fund, August 2025 [Source: X (Twitter)]
What arguments are there to defend Roman Storm from the DeFi community?
The DeFi community and legal advocacy organizations argue that Roman Storm should be acquitted because he did not operate or control Tornado Cash in a centralized manner.
Coin Center, the leading cryptocurrency advocacy organization in the U.S., has called for Storm to appeal and pledged legal support. According to community analyses, Tornado Cash is essentially an automated Smart Contract, lacking a centralized entity, not holding user assets, and all operations are performed by the wallet owners themselves.
"This is a sad day for DeFi; this outcome sets a dangerous precedent for the industry and the Blockchain developer community."
Jake Chervinsky, Legal Director, Variant Fund, August 2025 [Source: X (Twitter)]
Imposing the legal framework of centralized services on decentralized protocols will stifle technological innovation, forcing founders to be held accountable for actions beyond their control.
What does this case say about DeFi protocols?
Roman Storm's conviction highlights the legal challenges and risks that DeFi protocol developers face when anonymity features are abused for malicious purposes.
The fact that Tornado Cash was used to launder $600 million in the Axie Infinity hack or over $1 billion by North Korean hackers highlights the vulnerability of DeFi protocols to exploitation, raising urgent demands for a balance between technological innovation and legal compliance.
According to Chainalysis (2024), the amount of illegal cryptocurrency value laundered through decentralized platforms in 2023 reached a record high of over $8.6 billion, with Tornado Cash playing a significant role before being sanctioned.
The conviction of Storm serves as a warning to DeFi protocol developers that even if they do not directly operate services or control funds, they can still be held criminally liable if their products are abused.
What is the U.S. Department of Justice's view on Tornado Cash and the Storm verdict?
The U.S. Department of Justice emphasizes that Storm and his associates have greatly benefited while warning that digital assets do not exempt legal liability when abused as tools for crime.
According to Jay Clayton's statement, a representative of the Department of Justice, the success in speed and efficiency of Stablecoin and digital assets only holds value if it is within the legal framework. The Tornado Cash lawsuit has become a typical example of the tightening regulatory trend, increasing transparency in transactions that pose risks to the global DeFi ecosystem.
This perspective also reflects a shift in the attitude of U.S. officials towards decentralized projects when prioritizing national security, anti-money laundering, and compliance with sanctions over technological innovation.
What are the practical implications of the case for the entire DeFi industry?
The Tornado Cash verdict creates a ripple effect of concern, with many DeFi developers and investors wary of legal risks, potentially limiting the speed of innovation for decentralized products.
The DeFi developer community is concerned that legalizing responsibility for open-source software developers will make many projects hesitant to go public, change their operational models, or move entirely to more flexible jurisdictions. According to Delphi Digital (2023), capital inflow into DeFi has significantly decreased after a series of notable lawsuits, including Tornado Cash.
Industry experts also warn that if legal standards are not clear, the wave of Blockchain startups in the U.S. and Europe may take a cautious path or migrate to countries with friendlier policies.
What is the stance of policy advocacy groups regarding the Storm case?
Advocacy groups like Coin Center and DeFi Education Fund call for support for Storm's appeal, emphasizing that the verdict could set a dangerous precedent for developers of open protocols that do not control customer assets.
Coin Center evaluates this as "a sad day for the DeFi industry," while warning that developers cannot fully control all uses of their work, especially with open-source code and decentralized protocols.
DeFi Education Fund suggests a clear distinction between protocol developers and centralized financial service providers. Otherwise, innovative initiatives in Blockchain and decentralized Internet will be stifled by excessive legal risk.
How is the opposition to Storm's verdict supported by the community?
The international cryptocurrency community, experts, and major organizations all support the idea that Storm should appeal, arguing that the protocol does not store assets and cannot be classified as a money transfer service under the law.
Jake Chervinsky, Coin Center, and DeFi Education Fund all issued public statements noting that the House of Law's application of Section 1960 – a law aimed at organizations controlling real assets – to Storm is unfounded. This further highlights the contentious legal nature, requiring a review by a higher court to protect the rights to develop legitimate technology.
"I call on President Donald Trump to stop the Department of Justice from prosecuting two unresolved charges against Storm to avoid creating dangerous legal precedents."
Jake Chervinsky, Legal Director, Variant Fund, August 2025 [Source: X (Twitter)]
Many sources emphasize that if the verdict is upheld, it will place open-source developers – who are the main drivers of global financial innovation – in an unprecedented risk position, hindering the trend of DeFi and Blockchain.
What lessons can be learned from the Tornado Cash case for the DeFi industry?
The case demonstrates that the boundary between technology development and legal responsibility is increasingly fragile, prompting DeFi developers to pay more attention to compliance and legal risk management from the protocol design stage.
Experts comment that in the context of increased international control over digital assets, founding DeFi projects can no longer be complacent about legal factors. Building protective layers, monitoring mechanisms, anti-money laundering measures, and cooperating with authorities has become a practical requirement to protect oneself from being assigned criminal liability.
Many advocacy organizations are pushing for new regulations to clarify responsibilities and limit negative precedents that could impact innovation on a global scale.
What data or case studies illustrate the risks from DeFi protocols similar to Tornado Cash?
Many DeFi protocols have been exploited for money laundering, resulting in losses of billions of USD worldwide, clearly illustrated in the case of Tornado Cash.
According to the Chainalysis report at the end of 2024, more than 10 major DeFi projects have been used by hackers for money laundering. In 2022 alone, Tornado Cash at one point received up to 25% of the total cryptocurrency related to global criminal activity.
Protocol Name Estimated Money Laundering Value (USD) Peak Year Main Alleged Perpetrators Tornado Cash Over 1 billion 2022 North Korean Hackers, Axie Infinity RenBridge ~540 million 2021-2023 International Hacker Group Sinbad ~100 million 2023 Lazarus Group
These figures reflect the actual impact, reinforcing the view that automated protocols, if lacking a layer of legal control, will pose a risk of being exploited as a means of international crime.
How to balance privacy protection and crime prevention in DeFi?
The challenge for the entire industry is to ensure financial privacy while building effective crime prevention mechanisms through cooperation between programmers and regulators.
Suggested solutions include applying tools to detect and limit illegal transactions in Smart Contracts, creating technical stop points when signs of money laundering are detected. Some projects are beginning to integrate AML (Anti Money Laundering) solutions into their open-source code, or provide data collaboration windows for regulatory parties without affecting regular users.
Practical experience shows that larger markets demand transparent legal standards and clear guiding policies to develop technology while ensuring financial security.
Where is the future of privacy protection protocols on the Blockchain heading?
Under global legal pressure, privacy protection protocols like Tornado Cash will face many existential challenges, possibly forcing innovation or moving operations to more flexible jurisdictions.
Electric Capital's forecast (2024) indicates that the number of newly registered open-source DeFi projects in the United States is declining following major lawsuits, shifting to island nations or Asia-Pacific regions where the legal framework is more flexible.
However, financial privacy remains a core need and the main driving force for the long-term development of Blockchain, thus the market is expected to continue innovating integrated security solutions or more balanced approaches to regulatory requirements – rather than complete anonymity like the Tornado Cash generation.
How do international experts predict the long-term impact of the Storm case on the digital finance industry?
The Storm case is expected to reshape the global legal framework for DeFi, promoting a new definition of development responsibility, risk management, while forcing founders to emphasize cooperation with state agencies from the outset.
According to Bain & Company, the tightening of controls following major incidents is reducing investment rates in DeFi projects without licenses or transparent management models. In the long term, this is both a barrier and an opportunity for protocols that combine privacy and legitimization factors, helping DeFi continue sustainable development rather than being excluded from the global financial ecosystem.
Frequently asked questions about the Roman Storm and Tornado Cash case.
Has Roman Storm taken control of Tornado Cash users' funds?
No. Most legal analyses and critiques confirm that Storm only developed, not controlled user funds, as Tornado Cash operates decentralized and does not store assets.
How does the Storm verdict affect DeFi developers?
The verdict creates significant legal risks for open-source developers, causing many projects to worry about being assigned criminal liability if their products are misused.
Why was Storm convicted even though Tornado Cash is a decentralized protocol?
Storm was convicted on financial grounds, accused of operating an unlicensed money transfer service even though Tornado Cash does not control assets – a point that has sparked profound controversy in the professional community.
Which major organizations support Storm's appeal?
Coin Center, DeFi Education Fund, and many international market experts publicly support Storm and commit to providing legal assistance for the appeal process.
How does this case impact the global DeFi ecosystem?
The case prompts widespread legal warnings, forcing the entire industry to enhance control, transparency, and anti-money laundering measures, directly affecting the speed of technological innovation and international investment flows.
Are there any similar legal precedents to the Storm case in the cryptocurrency industry?
This is one of the first cases where decentralized protocol developers are prosecuted as if they were operating centralized financial services, raising concerns about precedent for future founders.
What will be the future of privacy protection protocols after the verdict?
These protocols will have to integrate multiple layers of control, closely cooperate with regulatory agencies to exist legally, while adapting to the requirements of both innovation and compliance with global laws.
Source: https://tintucbitcoin.com/phan-quyet-tornado-cash-anh-huong-defi/
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