- Crypto watchers call Pertsev's guilty verdict a 'watershed moment.'
- Anger and frustration gripped the DeFi community in wake of guilty verdict.
- Experts turn to fellow Tornado Cash developer Roman Storm’s trial in the US.
The conviction of Tornado Cash developer Alexey Pertsev is sending ripple effects through the blockchain industry, which is bracing for a long-foreseen chilling effect.
This is likely to deter devs from building privacy and security enhancing digital tools, said Aaron Mackey, senior staff attorney at the Electronic Frontier Foundation, a non-profit digital rights group based in San Francisco.
“Holding a developer of beneficial tools responsible for the wrongdoing of others is short-sighted and harms everyone’s privacy online,” Mackey told DL News.
Five-year sentence
A court in the Netherlands sentenced Pertsev to more than five years in prison. On Thursday, his lawyers filed an appeal.
Since his arrest in 2022 following the US government’s sanction of Tornado Cash, a crypto mixer, industry experts and legal experts have feared legal action that would make it risky to anonymise DeFi payments.
Even as the community contended it was wrong to criminalise codewriting and software development, Pertsev’s case emerged as a key test. Now that the verdict is in, DeFi will have to adjust.
“It’s a watershed moment for privacy and public permissionless blockchains,” said Erwin Voloder, head of policy at the European Blockchain Association.
“Ultimately as code cannot stand trial, in this unfortunate case — a developer did.”
‘Alexey is the unwanted martyr.’
— Eléonore Blanc, Crypto Canal
Tornado Cash is a decentralised, open source protocol that obfuscates crypto transaction history and grants anonymity to its users.
While its developers designed Tornado Cash as a privacy solution to otherwise public records visible on the Ethereum blockchain, it has also served as a tool for laundering illicit funds.
The Dutch court noted that $2.2 billion has been laundered through Tornado Cash. North Korean cybercrime organisation Lazarus Group used it to conceal proceeds from hacks of crypto exchanges and DeFi platforms.
During his trial, Pertsev contended he could not be held responsible for how others use the tool. And, since it is built on automated smart contracts with an open source code, he couldn’t do anything to stop it.
The court ruled that Pertsev and his fellow developers should have thought of how others may abuse Tornado Cash before they first launched it in 2019.
“Alexey is the unwanted martyr,” Eléonore Blanc, community organiser and founder of the Amsterdam-based Crypto Canal wrote on X. “Ashamed of the Dutch judicial system,” she tweeted. “Blind and deaf to true innovation.”
Privacy-enhancing technology
Privacy is a core value in the ethos that propelled the crypto industry.
Harry Halpin, CEO of privacy-protection platform Nym, said it was a “tragedy” that developers creating privacy solutions are prisoned for the actions of malicious actors.
Following this logic, bankers would be jailed “as the vast majority of money laundering by non-state and state actors is in cash and via traditional banking rather than cryptocurrency,” he told DL News.
“As privacy-enhancing technologies are historically embraced by EU and Dutch law… I see no reason for Alex not to lodge an appeal in the European Court of Human Rights in Strasbourg,” Halpin said. “It’s an appeal he would likely win.”
Eyes on the US trial
Pertsev’s appeal may get his case a fresh hearing. For now, all eyes are turning to Tornado Cash developer Roman Storm’s case.
Storm is set to stand trial in the US in September. His motion to dismiss the case has been countered by federal prosecutors, despite the support of the largest blockchain trade associations and industry players.
“I would hope that it wouldn’t have an impact on a completely different trial over here,” Laura Sanders, policy counsel at the Blockchain Association told DL News. It is unlikely the court will be able to use Pertsev’s case in its evidence.
EFF’s Mackey, however, previously told DL News that Pertsev’s trial outcome may foreshadow Storm’s.
Meanwhile, the chilling effect appears to already be underway.
“There’s been more hesitation to develop in the US and I know a lot of developers and entrepreneurs are thinking about moving outside the US, which is a very unfortunate outcome,” said Marisa Coppel, the Blockchain Association’s legal head.
Inbar Preiss is DL News’ regulation correspondent. Contact the author at inbar@dlnews.com. Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.
