Roman Storm Speaks - Tornado Cash Developer on What’s at Stake

We have a sobering episode today on Bankless. We have Tornado Cash developer, Roman Storm, on the podcast today. Now Roman, you might remember, he was arrested from a Seattle home just over a year ago. This was in August of 2023. He was arrested for the development and deployment of Tornado Cash, which we've talked about on Bankless as an open source code, was developed on Ethereum, and it provides privacy for blockchain transactions.

He now faces criminal charges in the United States and the prospects of decades in jail. Now, David and I think Roman's case is the most important case for digital rights of the 2020s, this decade, is code speech. If bad people use open source code to do bad things, do the developers of that code go to jail?

Are U.S. citizens allowed to even have digital privacy over their economic transactions? All of those things are going to be decided in this case. And just also on a personal level, a man's life is at stake here. As you can see in today's conversation, the full weight of the U.S. government is being leveraged to prosecute Roman Storm. And so there's a massive power asymmetry here to correct for.

Roman's case is coming up in April and he needs funds for his legal defense. He doesn't have the money to fight this alone. We're hoping the crypto community can step up to fund him. We gave him $25,000 to Roman's case in the beginning of this year. And so in addition to that, we are also giving him another $25,000 after this recording and hope that you will also listen or join us to support Roman.

and also our own fight to have a right to privacy in crypto because that is also what is at stake in this case. I don't know if we will win this fight. The fight for the right to use cryptography in the United States has a long history of legal battles which have all dictated the future of freedom and privacy in the United States. This is one of those cases and a moment when the crypto industry has the opportunity to shape the future

in a very big way on the shoulders of Roman storm and his fight against government overreach. So this is Roman storm with his lawyer on the tornado cash case and what's at stake.

Thank you. Thank you. OK, so we've got a few questions for you today. First, I just want to ask, Raman, on a personal level, how are you feeling? How are your spirits just overall?

Hi, Ryan. Hi, David. Hi, people who is listening right now. Thank you for asking. Honestly, every day I go through a wide spectrum of emotions from confident and energized to isolated and frankly scared.

Let's face it, I find myself in a unique position with this federal indictment where I still struggle to understand why did I get arrested. And yet my case will serve as a precedent for other programs like myself.

It's a huge responsibility, to be honest, to carry this weight on my shoulders for over a year now. But what gives me hope is the support of our crypto community, both spiritual and, of course, financial. Because my legal fight is everyone's fight.

And to use Alexander Dumas word that I like to quote, all for one and one for all right. Roman, people I think know you as the tornado cache developer. That's like how you are known in this space. Maybe you could just shed a little bit more light upon yourself. Who are you? How did you become a developer? OK, sure.

I might have shared this in the past, but I think my journey towards software development began when my parents gifted me a computer at age about seven. Now, this was a very unusual gift because my peers in post-Soviet Russia weren't able to have computers until high school or even college age.

My parents wore a lower middle income, regular folks, but somehow they saw this potential in me, and I will be forever grateful to them for that. Afterwards, I will basically learn everything I could about computers, all fixed broken hardware and a sample of Frankenstein computers from random scraps. I will help my friends with software upgrades and virus protection that you graduated high school.

Later I immigrated to United States, specifically Silicon Valley, because I saw it as a capital of tech innovation and I wanted to be in this environment. After coming to the United States, I took programming courses at City College of San Francisco and did everything I could to get better at programming.

I just wanted to solve problems that would improve people's lives. I was living the American dream. You were living the American dream. Maybe that's in the past tense, Roman. I'm not sure what that means now, but I want to ask you on your developer journey, why did you decide to develop tornado cash?

That's a very tough question. But first, my lawyers say I have to be very careful to say that when you say tornado cache, I understand that you meant to refer to the software, specifically the smart contracts, which people call the tornado cache pools.

And there have been a lot of interviews where I've told the story, but in short, the Ethereum community had been in need of a privacy tool for a lot of very legitimate reasons. Several events happened at the time that involves our team starting to work on it. And I'm sure your listeners have heard.

that I met Vitalik Buterin at Yves New York Hackathon, who suggested it. Eventually, we just had a sense that we were in the right place at the right time. Obviously, I look back at it now with some sense of irony. But I'm still proud of my skills as a programmer and of my intention to improve the blockchain infrastructure.

So Ramen, your house was raided August 23rd, 2023, a little over a year ago, your house in Seattle. And you were there. Talk about that experience. What was that like? Were you surprised? Were you scared? What was that like? To say it's surprise. It was a surprise. It's just to put it mildly. It was the most traumatic event of my life.

This arrest was even more unexpected since my lawyers wore in communication with the Department of Justice authorities, and I had been compliant with the Department of Justice request. But that Wednesday, around 6am in the morning, with my three-year-old daughter asleep in the house, I woke up from the sudden noise outside my bedroom.

When I opened the door about eight armed sword federal agents in a sword gear, they pointed rifles at me and shouted, put your hands up.

After I was handcuffed, they grabbed my daughter and searched the house. All of my electronic devices were seized, part of my property was broken, which was totally unnecessary. But property damage was the least of my worries at the moment. I kept thinking about the trauma that my child would get from the scene. And I was trying to reassure my daughter that everything would be okay.

Yeah. I'm sorry that happened to you and your daughter, Roman. I want to ask about the nature of the charges. So that was the initial arrest. But what were you being charged with? And I understand that you pled not guilty. Why did you plead not guilty?

So basically, on that day, I learned that I had been indicted and I was charged with one count of conspiracy to commit money laundering, which has a maximal sentence of 20 years in prison.

And then one count of conspiracy to operate an unlicensed money transmitting business, which has a maximum sentence of five years in prison. And one count of conspiracy to violate the International Economic Emergency Powers Act, which has a maximum sentence of 20 years in prison, for short, people called IEPA charge, which is a sanction violation.

Based on this math, the maximum prison time I'm facing should be 45 years, but it gets a lot more complicated than that. I will not get into all the details, but let's just say I could be spending several lifetimes in prison if found guilty. Okay, maybe this is where, Kerry, you come into the picture here. So about the not guilty charge. Why did Roman plead not guilty?

He pled not guilty because he is not guilty. You also ask about the nature of the charges. So I can go into that a little bit more than Roman can. The government has, as he said, brought three charges. The indictment has three charges in it. And we've brought motions to dismiss, which at this point have been denied. But through the motions, we learned a lot about the government's charges and a little bit more about the evidence underlying them.

And, you know, we believe he is not guilty of the government's charges. First, you know, he mentioned the unlicensed money, money transmitting charge. So the government claims that tornado cash was a money transmitting business or an MSB. And I think when most people think of a money services business, you know, they think of a financial institution. A money services business is a type of a financial institution.

And we think of financial institutions like banks that actually hold cash, right? But the statute is broader and includes any business that buys or sells or transfers funds. And so, again, an obvious example outside of banking is Western Union, right? They're taking custody of people's funds and then they're sending them somewhere else to another country.

And when someone falls within an MSB such as that, then they still are subject to all kinds of detailed laws and regulations like banks are. So in the crypto sphere, you've probably seen this before. There have been other MSB cases where different crypto projects have been accused of acting as an MSB. But the distinction with Roman's case is that those are all have been centralized businesses where like Western Union,

actually took the crypto, held it, transferred it. This is not that, right? This is not, no one had custody of these funds. Only the users had custody of their funds in the tornado cash pools. So tornado cash didn't have custody of the funds and certainly Roman did not have custody of the funds or the developers. There's no backdoor key, there's none of that that Europe

Again, your listeners will understand. And we believe the law is very clear that you can't be an MSB if you don't control the funds. We just think as a legal matter, that's the state of the law. And then there's another exception to the MSB rules for software providers. And again, we think that the activities that Roman and the other co-developers did would fall under the software providers.

to exception to the MSB rules. So, you know, and then I think finally an issue that's near or dear to this community's heart, you know, there's an allegation that tornado cash is a business that, you know, that it

It provides a service for a fee, and first of all, the protocol charges no fee. But it's also not a business, right? It's an open source, completely decentralized project. And so in short, we believe that tornado cash is not NMSB, and Romans should not have been charged for that.

That's charge number one. So in some ways it gets worse because the government has also charged women with conspiracy to money laundering and conspiracy to violate sanctions. And these, in our opinion, are pretty unprecedented here.

As to the money laundering charge, it's a specific intent charge. What does that mean from a legal perspective? It means the government has to show that a defendant specifically intentionally agreed to launder funds and knew that those funds were the proceeds of some kind of offense.

And here, really, the only people who had that knowledge and had that intent were the bad actors who used tornado cash that no developer, anyone else can control. So the allegation is some black hat actors, but black hat hackers associated with North Korea use the protocol. But there's no allegation, there's no evidence that Roman or his Code of Enders had anything to do with that. Those are people who just use an open source protocol.

So what the government's really trying to do here is hold Roman criminally liable for bad actors using the protocol when he had no ability to stop them. And it sounds like trying to put a negligence standard into a criminal case, and that's how we feel about it, that it's really

It's really saying you should have done something to stop them rather than you have an agreement with them, which he didn't have. No one can stop a criminal actor from using an immutable open source protocol on the blockchain, period. So we think that should be the end of that charge. Finally, as to the sanctions evasion, that kind of charge is intended for cases where a defendant deliberately chooses to do business with a sanctioned person or entity.

It also has a really high intent standard, which is called wilfulness under the law. And again, the government admits that, you know, Roman has, we believe that the government understands Roman had no contact with these, you know, bad actors, but it still seeks to penalize him for actions that they did.

And that would effectively create sort of a strict liability under sanctions regulations for developers. You can imagine like this really scares people in the DeFi industry that there would be some strict liability. You set up a protocol, you put it out on the blockchain, it's immutable, and someone uses it for ill purposes and all of a sudden then you are deemed to be responsible for sanctions violations because they were a blocked actor. You didn't know, you couldn't stop them.

So we find it unfair that the scope of a developer's liability for code is being worked out in a criminal case. I guess that's my kind of legal point. I mean, I've touched on each of the types of allegations here, but kind of writ large. If the government thought there was a regulatory violation here,

then there were ways to pursue that as a civil matter. But the government agencies never charged Roman or the developers civilly. OFAC never did, Finston never did. I know you guys spend a lot of time. I've heard it talking about regulatory overreach. But most of the time they're talking about the SEC, right? And I also defend those cases and there's been unfairness there trying to make new law regulating by enforcement. But here regulating by enforcement in a criminal case, you know,

It's sobering. And the Department of Justice, or at least the U.S. Attorney for the Southern District of New York, kind of chose to put the full weight of criminal enforcement on a developer in this case and apply it after the fact to an emerging technology. And we see that as an unfair process.

Yeah, Carrie Roman. I'm sure you guys know we've covered this up on Bankless at Times is that there's been this long arc of legal cases as it relates to cryptography that dates back to the 90s. There's a name for these, like the Crypto Wars 1.0. And now we've kind of talked about like entering crypto wars.

Two dotto and I see this case as being a part of that arc of the legality of cryptography inside of the United States. And so this is this is Roman's case to fight. But as Roman said, one for all and all for one, Gary, maybe you could just shed a little bit more light at one. What's at stake for the crypto industry here in the United States and digital rights here in the United States? What rights are implicitly being protected in this case?

Well, it's the right to code, right? It's the First Amendment right to be able to write software and have that fall within the First Amendment. And that's an issue we've already raised. We raised on our motion to dismiss. Under the prosecution's view, they can go after any developer who writes software that moves digital assets.

for many laundering, for sanctions, not just for running what they believe to be an MSB. Can you say that again, Carrie? They can basically go after any developer who writes software, is that what you said? Yes. I mean, if you write software and you put it out there and other people use it for bad purposes, that's a precedent that they're trying to establish here.

And there's other rights too. I mean, obviously that increases the legal risk of building DeFi. And I think a lot of people in the DeFi community are talking about that because it depends on openness and immutability. We've also already won some other important rights too. I think people don't talk a lot about the Fourth Amendment.

But we do see this sometimes in our cases as well. Our motion to dismiss that was touching on more of the First Amendment got a lot of press, but we also brought a motion to suppress that has application for Fourth Amendment rights. What we see happening a lot, and I've been in criminal defense and regulatory defense in this space for many years now, what we see now often is the government bringing a search warrant and claiming that because there is a cold wallet in the house,

that it can seize all funds on the cold wallet. Yes, I think it's been under publicized because you could never do that with a conventional bank account. The government knows they can't seize your ATM card and then go to the bank and take your money.

they know that. If there was a basis to seize funds, they have a whole different process for that. They have to have a high level of tracing, they have to go and get a big warrant, a special bank warrant. But they have been claiming that they can seize any and all crypto in the home and decide later whether it's connected at all to their allegations. And you can imagine, we represent lots of people who have

lots of crypto from very legitimate sources, projects that date back years, mining, other things. And so with this allegation and affidavit, they don't first have to show that it's connected to whatever they say is the crime or the bad act. They just take it all.

And so we put in a motion to suppress where we pointed out what your audience knows quite well, which is, of course, there's no crypto on that stick. The crypto is out on the blockchain. It's out on the internet. And while the stick may provide the keys or the access to that and the ability to control it, it is not on the stick itself. And that actually is a very

clear application that then the Fourth Amendment would mean it's not within the home. It can't be seized on that warrant. And I think that, again, I've seen this not just in Roman's cases, but I've seen it in many cases. That is an important right of people to separate out and protect assets that there is no allegation or touched or tainted by any criminal allegations. So in our case, once we brought that motion, we argued it, we debated it, we put it before the judge, but the

But the government came back and actually said, we'll agree with you. We won't take any crypto without getting a further more specific warrant. And the issue went away. But I want to publicize it because I want other defense practitioners. I want other people to know in this space because it really makes it hard for people to defend themselves too when all of their legitimate, untainted funds have all been swept.

So when we ask the question of what's at stake for people in crypto and then the development open source community, your answer was like the right to code is what's at stake. And then what's at stake for American citizens? You mentioned two civil liberties, the First Amendment and the Fourth Amendment. I mean, these stakes are pretty high for all of us, for everyone who's listening to this episode today. The stakes are that high could not be more important. I want to ask you personally, Roman, what's at stake for you on a personal level?

On a personal level, my whole life, literally. I have a huge uncertainty right now, like, what's going to happen in the future? What do you need right now? Like, how can we help? How can people listening help?

Well, right now, the biggest need I have is financial. Many ask me actually, Roman, why are your lawyers so expensive? We're worth it. Trust me, yes, I agree. At this point, I need an additional $2 million to see the scale through trial in April.

This now is based on an upcoming trial budget. I can elaborate a few things. You can't just have any authorities handle this case. You just can't. You need very specialized attorneys like Waymaker Team who have substantial experience in high-stakes criminal cases involving technology.

The hourly rates for firms like that, they start around 500 an hour and can go up to 1500 an hour and sometimes even more. So we also need technical experts. You need credible people with testimonial experience. Those people are also very expensive, particularly in New York.

The motions and filings in this case as we lead up to a trial are complex documents involving hours up and hours of research applied to the facts of the case and they present important issues. Anyone who has dealt with litigation or like even civil litigation will tell you from what an expensive process it is to litigate complex motions.

Further, well, the government using unlimited resources for their agenda, they have four lawyers and numerous paralegals on the case. And some time ago, we received like three terabytes of discovery data for us to go through. That's about like one million pages, which have to be analyzed by multiple members of my legal team.

Finally, trial preparation and the actual trial that also requires a commitment of course to like 90 hours per week for legal team. The burn rate decreases quite a bit during that period, and I'm looking at at least a million dollars in costs just during the trial alone.

Yeah, the costs here are definitely substantial. But if bankless sisters, you can't see the ROI when we're talking about $2 million here and literally our digital civil liberties are on the line here. I think that this is a compelling ROI for the community, for everyone listening. I'll say on behalf of David, myself, Bankless has donated to this cause. We'll include a link in the show notes where you can also donate and support Roman Storm to trial and carry his lawyer.

We're going to take this all the way to trial and hoping for a good outcome. Roman, thank you for joining us today. Carrie, thank you as well. Thank you. I appreciate it. David, thank you so much. Thank you guys. Thankless Nation. There'll be a link to the donation in the show notes. Make sure you go do that. If you're compelled by this case and the story, go do that right now. We'll also include some more details in the show notes on this as well.

Gotta let you know, as always, crypto is risky. The stakes are high. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless Journey. Thanks a lot.