Inside the Tornado Cash trials — and why Alexey Pertsev’s treatment was ‘harsher’ than peers in US

The criminal cases against the developers of Tornado Cash — one in the U.S. and the other in the Netherlands — highlight the disparity in how authorities in both countires have pursued them.

“Although the charges seem to be heavier in the US, the treatment of the developer is so far harsher in the Netherlands,” said Fatemeh Fannizadeh, lawyer and co-founder at Internet Defense Alliance, an applied research lab.

Dutch authorities have alleged that Alexey Pertsev’s involvement in the development of Tornado Cash meant he helped facilitate money laundering by North Korean cybercrime gang Lazarus Group, among others.

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Similarly, US prosecutors’ charges against Tornado Cash co-founders Roman Storm and Roman Semenov allege the protocol helped launder over $1 billion worth of illicit funds, and also charged them with sanctions violations and conspiracy to operate an unlicensed money transmitting business.

The first move came from the US Treasury, when the Office of Foreign Assets Control sanctioned Tornado Cash in 2022.

Despite similar charges, legal experts and industry representatives have noted stark differences in how law enforcement agencies in the two countries have pursued them.

The first difference is with the nature of the arrests themselves. Following his arrest in August 2022, Pertsev was detained for almost nine months before being released on house arrest in May and being forced to wear a GPS monitor.

‘In cases like Alexey Pertsev’s, limited public information is available and the Dutch court proceedings can be challenging for non-Dutch speakers to follow closely.’

—  Marina Markezic, executive director of European Crypto Initiative

“The Netherlands has been at the forefront of making it easier to prosecute money laundering, without requiring a conviction of a predicate offence since 2001, much earlier than many other EU states,” Silke Noa, independent privacy and crypto lawyer, told DL News.

Dutch authorities can detain someone without charges up to 104 days, Noa said. That’s why it was easier for authorities to detain Pertsev in the Netherlands and access his private data than it would have been in the US.

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By comparison, Storm was arrested and released again on a $2 million bond after just one day.

Secondly, the sanction violations charge against Storm and Semenov could prove tougher to beat than the money laundering ones, Bill Hughes, director of regulatory matters at ConsenSys and former Department of Justice attorney, told DL News.

A criminal charge for sanction violations is a broad crime in the US, meaning it may be harder to counter prosecutors’ arguments on what constitutes the offence, Hughes said.

The sentence for sanctions violations on their own could be up to 20 years in prison.

A third difference in the cases is in how much information has been shared with the public and responded to. In the US, think tanks such as Coin Center and advocacy groups such as the Blockchain Association have made efforts to show potential weaknesses in the prosecutors’ cases, decrying the charges as an attack on digital privacy.

But in the Netherlands, it has been more difficult for groups to organise behind Pertsev.

NOW READ: Tornado Cash founders agonised over KYC almost a year before sanctions, prosecutors say

“In cases like Alexey Pertsev’s, limited public information is available and the Dutch court proceedings can be challenging for non-Dutch speakers to follow closely,” said Marina Markezic, executive director of European Crypto Initiative, a regional advocacy group.

With so little information about the case publicly available, some have been cautious to wade into the fray.

Nonetheless, Pertsev’s case has brought together a local movement. In the last year, Eléonore Blanc, founder of CryptoCanal and EthDAM organiser in Amsterdam, has rallied support for the developer.

“Alexey has become a martyr,” she told an EthPrague audience in August. “He’s now representing a cornerstone we’re going through in crypto.”

‘An unprecedented setback for open-source development’

The money laundering charges against Pertsev and the Tornado Cash founders have shaken the crypto community. While Pertsev and the others claim they never intended for the mixer to be used by terrorists and criminals to launder dirty money, prosecutors allege that by erasing crypto transaction history, the mixer has become a valuable tool for money launderers.

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Open source software developers around the world have been paying close attention to the proceedings, concerned about whether they will also be held liable for contributing lines of code that end up being used for illicit purposes.

“A conviction would be an unprecedented setback for the open-source development community,” said the Internet Defense Alliance’s Fannizadeh. If that happens, innovation would come with “fear of liability and responsibility, stirring development away from some fields such as full privacy,” she said.

The Tornado Cash case spurred what independent lawyer Noa calls an “open source chill” — a phenomenon in which open source developers are hesitant to develop new software due to fears of being prosecuted if the technology is used by bad actors.

The trials will also test the crypto community’s long-held belief that “code is speech,” the idea that code is a form of expression and that it should therefore be protected under free speech laws.

Placing a a computer program like Tornado Cash “on an OFAC sanctions list is crazy and violates free speech,” said Harry Halpin, co-founder and CEO of Nym, an internet privacy infrastructure.

But Kyle Langvardt, assistant professor of law at the University of Nebraska College of Law, recently told DL News that “code is speech” is a “wild” theory that doesn’t don’t hold much water. “The Supreme Court has never endorsed code as speech, despite occasional misconceptions on this point,” Langvardt said.

If you have a tip on Tornado Cash legal proceedings, contact the author at inbar@dlnews.com.

Update: The featured image was updated on on September 17 to include the three Tornado Cash developers.