By Michael Scott
Peter Van Valkenburg, Coin Center research director, claimed that Tornado Cash, a crypto mixer, is not a money transmitter but an anonymizing software provider.
Coin Center, a crypto advocacy group, has slammed the current indictment of two ex-Tornado Cash developers. It argues that the facts provided fail to reveal any vivid violations of money-transmitting-associated crimes.
On August 2, the United States Office of Foreign Asset Control (OFAC) indicted Roman Semenov and Roman Storm for collaborating to run an unapproved money-transmitting business and other charges.
Indicting Tornado Cash Developers Criticized, Alleging Non-violation of Financial Crimes
Via a follow-up opinion piece, Peter Van Valkenburg, Coin Center research director, claims that the accusations in the indictment seem to go against the U.S Financial Crimes Enforcement Network’s guidance. In this case, Tornado Cash only offers the money transfer software instead of transferring it itself.
Valkenburg wrote that the only thing claimed in the indictment concerning the defendants’ unlicensed money transfer is that they partook in shifting funds on the public’s behalf. Besides, they did so in the absence of registration with FinCEN.
However, Valkenburg questioned if the indictment highlighted any facts that really depict the defendants’ participation in activities considered money transfer under the relevant regulation. He highlighted an explanation by FinCEN concerning the elements of ‘money transfer services’ under the United States Bank Secrecy Act. It states that an anonymizing software provider is not a money transmitter.
Software Users Identified as Money Transmitters
Valkenburg also highlighted another quote claiming that only persons utilizing the software can be categorized as money transmitters. The excerpt claims that an individual who uses the software to anonymize the individual’s own transaction will be either a money transmitter or user, based on the reason behind every transaction.
Despite Valkenburg’s argument that Tornado Cash eased people’s utilization of the protocol’s smart contracts to transfer money, he claimed it did not mean that the developers were money transmitters themselves. He explained that it does not somehow indicate that they became transmitters just because they offered tools that others utilized to transmit their money.
Valkenburg also castigated assertions in the indictment claiming that Semenov and Storm had total control over the smart contracts. He argued that Ethereum smart contracts vary, and people sometimes lack complete control or have some control over their operation. This primary fact is required to establish if one is executing money transmission.
Cash Tornado Developers Included in Blocked Persons List
In October, Coin Center initially opposed the United States Treasury by suing the agency for Tornado Cash’s illegal and unprecedented sanctioning. According to the OFAC indictment, Semenov and Storm operated an unapproved money transaction service by partaking in moving funds on the public’s behalf. Besides, the enforcement agency stated the developers needed to register with FinCEN.
On August 23, Semenov was included in OFAC’s Specially Designated Nationals and Blocked Persons list. On the same day, the Federal Bureau of Investigation (FBI) arrested Storm in Washington state. In August 2022, Alex Pertsev, another of Tornado Cash’s founders, was incarcerated by Dutch authorities prior to his release in late April.
Peter is confident that the Tornado Cash saga’s outcome will significantly affect the U.S. citizens’ legal rights to create and publish software.