Source: Mises.org
On May 14, Alexey Pertsev, one of the lead developers of Tornado Cash (TC), was found guilty of money laundering by a Dutch court and sentenced to sixty-four months in prison. TC is a privacy-preserving protocol developed for the Ethereum blockchain: it allows users to deposit funds in a TC pool and withdraw them to a different address, thus making it impossible for external observers to track financial activity. TC is completely noncustodial, meaning that users are in control of their own money at every step of the process. In other words, developers do not have any technical means to control how individuals interact with the TC smart contracts.
Because of its privacy-preserving features, TC was sanctioned by the Office of Foreign Assets Control in August 2022: citing concerns with money laundering and terrorist financing, the United States government made it illegal for US citizens to use TC. Soon after the blacklisting by the Office of Foreign Assets Control, Pertsev was arrested in the Netherlands; Roman Storm and Roman Semenov, the other TC lead developers, were arrested by US authorities in August 2023 and charged with money laundering and sanctions violations. The sentence against Pertsev creates a precedent that threatens not only developers’ freedom to write open-source code, but also users’ ability to transact without being tracked by unwanted third parties, including government snitches. The war on privacy waged by Western regulators is in full swing.
A Truly Unprecedented Sentence
While a traditional bank is technically able to prevent clients from moving funds if it deems the transfer suspicious, this cannot happen in TC: users can interact with the smart contracts as they wish without asking for permission from anyone, including Pertsev. Even now—with Pertsev, Storm, and Semenov in jail and despite the Office of Foreign Assets Control’s sanctions—the TC smart contracts are available on the Ethereum blockchain for everyone to use.
Despite this, the judge maintains that Pertsev is guilty of money laundering because TC can be exploited by others to launder money; that is, the mere fact that criminals can use the software developed by Pertsev is enough to make Pertsev a criminal. If this principle is applied consistently, developers of privacy-preserving browsers like Tor or of privacy-preserving messaging apps like Signal may be put in jail because nothing prevents criminals from using them to communicate….