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Forget CZ and SBF. Groundbreaking Cryptocurrency Ruling Coming Next Week – DL News
A version of this story appeared in ours The guide newsletter of May 6th. subscribe Here.
Quick question: Is every cryptocurrency narrative now a legal story?
The industry has been booming for some time with occasional lawsuits and regulatory actions – thanks Gary Gensler! – but these days it seems the pot has blown off the lid and spilled onto the floor.
There was the Civil trial of Craig Wright in London, then the sentencing of Sam Bankman-Fried to a 25 year prison sentenceand last week the surprising news that Changpeng Zhao, once SBF’s arch-rival, was sentenced to a very manageable four months in a US prison for failing to do an adequate job of containment money laundering on Binance.
But once you get past all this action, there is only one case that can truly reset the course of the cryptocurrency industry that was born 15 years ago. And it will reach its peak on May 14th.
This is the moment a three-judge Dutch panel will deliver a verdict on Alexey Pertsev, the Tornado Cash developer accused of laundering $1.2 billion in illicit assets for a bevy of bad actors, including the hacking group North Korean Lazarus.
Pertsev may not have the celebrity fame of SBF or the global influence of CZ, but his case cuts to the heart of much of what makes cryptocurrencies work: writing code and business models based on online privacy.
During Pertsev two day trial In March, the 30-year-old Russian defended his role in the cryptocurrency mixer by claiming that its technology, namely smart contracts, prevented him from knowing who was using its services to anonymize their transactions.
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That knowledge was literally not part of the program, he said.
So punishing the one for whom Tornado served is not just a misunderstanding of technology, it is also a miscarriage of justice, he suggested.
“I have never had a desire to help or tolerate criminals in any way, I have a different mentality,” Pertsev told the court. “I hope you understand that.”
Nonsense, said Dutch prosecutor Martine Boerlage.
He said that Tornado Cash is a company that sells a service like any other, and that its officials, including Pertsev, cannot hide behind crypto language to avoid responsibility for breaking the law.
But the whole point of decentralized finance is to enable permissionless transactions without the need for intermediaries.
Brokers, exchanges and other intermediaries happen to be the ones who know the parties and counterparties, and more importantly, check their good faith under the punishment of the law.
So you can see what’s at stake.
If three Dutch judges decide in eight days that Pertsev is guilty, they would also rule on the presumption that blockchain-based transactions fall outside the international anti-money laundering legal system erected over the past 25 years.
SBF was blamed for old-fashioned fraud. CZ pleaded guilty to failing to implement anti-money laundering controls. Neither case was new.
Pertzev, on the other hand, is judged for what he should have known and done, despite DeFi innovations.
While the cryptocurrency industry will have to deal with the consequences of a guilty verdict, the young developer will have a more pragmatic concern.
He will prepare for a potential five-year prison sentence.
Email the author at ed@dlnews.com.