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

Episode Date: November 21, 2024

📣DONATE TO ROMAN’S CASE https://juicebox.money/@defend-roman-storm  Tornado Cash developer Roman Storm faces decades in prison after being arrested last year for creating open-source privacy tools on Ethereum. His case could define whether code is speech, if developers are liable for bad actors, and if Americans have a right to digital privacy. With the full force of the U.S. government against him, Roman’s trial this April is a pivotal moment for digital rights. Bankless has contributed $50k to his legal defense—this is about protecting privacy for all of us. Roman Storm, alongside his lawyer, joins us to discuss The Tornado Cash case and what’s at stake. ------ TIMESTAMPS 0:00 Intro 2:36 Roman’s Spirits 3:58 Who is Roman Storm? 5:40 Why Tornado Cash? 7:06 House raiding experience  8:43 What Roman was charged with 10:00 Why Roman is not guilty  17:10 What’s at stake 22:31 How to help Roman 25:16 Closing & Disclaimers ------ RESOURCES  Donate to Roman’s Case https://juicebox.money/@defend-roman-storm DeFi Education Fund - Amicus Brief - https://www.defieducationfund.org/_files/ugd/84ba66_063f9d1fd563466cadfa3f5434f918e9.pdf ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

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 his 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 could 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, a listener, 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. Bankless Station, I'm very pleased to introduce you to Roman Storm. He is the developer of tornado cash. We also have Kerry Curtis Alex. She is an attorney representing Roman's case at Waymaker. Carrie, Roman, welcome to bankless. Thank you. Thank you. Okay, so we got a few questions for you today. First, I just want to ask Roman on like a personal level, how are you feeling? Like, how are your spirits just overall? Hi, Brian. Hi, David. Hi, 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 struggled to understand, like, why did I get arrested? And yet, my case will serve as a precedent for other people. 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,

O for one and one for all, right? Roman, people I think know you as the Tornado Cash 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?

Okay, sure. I may 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 were unable to have computers until high school or even college age.

My parents were 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'll basically learn everything. everything I could about computers. I'll fix broken hardware and assemble Frankenstein computers from random scraps. I'll help my friends with software upgrades and virus protection until 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 cash. I understand that you meant to refer to the software, specifically the smart contracts, which people call the tornado cash pools. and there have been a lot of interviews where I've told this 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 with Alec Boutterian at if New York Hackathon,

who suggested it. Eventually, we just had the 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, Roman, your house was rated August 23, 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 was a surprise, it was just to put it mildly. It was the most traumatic event of my life. This arrest was even more unexpected since my lawyers were in communication with the Department of Justice attorneys. and I had been complying with the Department of Justice Request. But that Wednesday, around 6 a.m. in the morning, with my three-year-old daughter, as sleep in the house, I woke up from the sudden noise outside my bedroom.

When I opened the door about like eight armed SWAT federal agents in a SWAT gear, they like 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 ceased. 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've been indicted. And I was charged with one count of conspiracy to commit money laundering. which has a maximum sentence of 20 years in prison. And then one count of conspiracy to operate and 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 AIPA charge, which is a sanctioned 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. You know, 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, you know, 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 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. 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 Cryptosphere, you've probably seen this before. There have been other MSB cases where different, you know, crypto projects have been accused of acting as an MSB. But the distinction with, you know, Romans case is that those are all have been centralized businesses where, like Western Union, they 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 and 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 you're, again, that 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 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, you know, 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, you know, tornado cash is not an MSB, and Roman

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 Roman with conspiracy to money launder 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. You have to what does that mean, you know, 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 use tornado cash that no developer anyone else can

control. So, you know, the allegation is some black hat actors, but black hat hackers, the associated with North Korea used the protocol. But, you know, there's no allegation. There's no evidence that Roman or his code offenders had had anything to do with that. Those are people who just use an open source protocol. So, you know, 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 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, you know, 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 willfulness under the law. And again, the government admits that, you know, Roman has, or 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 defy 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, you know, 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, you know, 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 developer civilly. OFETs. back 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 a 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. We see it as an unfair process. Yeah. Carrie Roman, I'm sure you guys know, we've covered this 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.O. And now we've kind of talked about like entering Crypto Wars 2.0. 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 to be 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 money laundering, for sanctions, not just for, not just for, for, running what they believe to be an MSB. Can you say that again, Carrie?

Like, 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, I mean, that's the precedent that they're trying to establish here. And there's other rights, too. I mean, obviously, that increases the legal risk of building defy. And I think a lot of people in the Defy

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. Oh, my God. 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 bank 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 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 Romans cases, but I've seen it in many cases. That is an important right of people to separate out and protect assets that there's 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, it before the judge, but the government came back and actually said, we'll agree with you. We won't, 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, it 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 a 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 lawyer so expensive? Oh, we're worth it. Trust me, yes, I agree. At this point, I need an additional $2 million to see this case through trial in April.

This number is based on the upcoming trial budget. I can elaborate a few things. You can't just have any attorneys handle this case. You just can't. You need very specialized attorneys like Waymaker. 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 1,500 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 upon 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 increases quite a big 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 listeners, 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 Dave and 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. Kerry, thank you as well. Thank you. Right. I appreciate it. David.

Thank you so much. 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 in the story, go do that right now. We'll also include some more details in the show notes on this as well. Got to 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.