In response to Roman Semenov and Roman Storm’s recent indictment, Coin Center, a well-known crypto policy advocacy group, has cautioned that the case may create a hazardous precedent by potentially criminalizing the act of distributing software code. The group claims that the allegations made by the U.S. Semenov and Storm’s alleged involvement in unauthorized money transmission, according to the Department of Justice (DOJ), may not follow the standards established by the Financial Crimes Enforcement Network (FinCEN).
Contravention of the FinCEN Guidelines
According to the indictment, the defendants transferred money without authorization on behalf of the general public while improperly registered with FinCEN. The acts listed in the indictment, according to Coin Center’s Research Director Peter Van Valkenburgh, “appears to be more closely related to providing software and communication services than conducting money transmission,” though. Money transmitter services are defined as those that take and transmit money or value under the Bank Secrecy Act.
The 2019 FinCEN Virtual Currency Guidance, which exempts suppliers of anonymizing software from being regarded as money transmitters, is cited by Coin Center. The guidelines state that people or organizations involved in commerce rather than money transmission include those that provide instruments, such as software, used in money transfer. Van Valkenburgh makes a point.
Software provision is different from regulated financial services
Van Valkenburgh argues that the accusations made in the indictment, such as the defendant’s ownership of the software that hosts user interfaces and smart contracts, their promotion of the Tornado Cash tool, and their earnings from a governance token, are not necessarily equivalent to the receipt and transmission of money. He stresses that the act of marketing or making money off of software development does not change the provision of software into the provision of regulated financial services.
A Brief History of the Tornado Cash and Indictments
An open-source program called Tornado Cash was created to make transactions on the Ethereum blockchain anonymous. Storm and Semenov have been accused by the DOJ of conspiring to violate sanctions, launder money, and run an unlawful money transmission business. These accusations are related to Tornado Cash’s claimed involvement with the Lazarus Group, a sanctioned North Korean cybercrime organization, and its alleged facilitation of over $1 billion in money laundering activities.
Orders and Arrests Issued by the Office of Foreign Assets Control
Roman Semenov has been added to the OFAC’s list of specially designated nationals, making him vulnerable to asset freezing and restrictions on doing business with American companies. The Federal Bureau of Investigation and the Internal Revenue Service both apprehended Storm, but Semenov is still at large. Third co-founder Alexey Pertsev was detained in 2022 but freed pending prosecution.
The Treasury Department was the target of legal action brought by Coin Center in the past due to the restrictions placed on Tornado Cash. The group has most recently urged Congress to create more detailed rules for taxing cryptocurrencies.
The position taken by Coin Center in this developing legal environment emphasizes how this case may affect the larger software development and cryptocurrency communities.
