Blockchain
Why privacy advocates say Tornado Cash developer Alexey Pertsev’s conviction ‘hurts everyone’ – DL News
- Crypto observers are calling Pertsev’s guilty verdict a “watershed moment.”
- Anger and frustration gripped the DeFi community following the guilty verdict.
- Experts turn to the trial of fellow Tornado Cash developer Roman Storm in the United States.
Tornado Cash developer Alexey Pertsev’s belief is generating ripple effects in the blockchain industry, which is gearing up for a long-expected chilling effect.
That will likely dissuade developers from creating digital tools that improve privacy and security, said Aaron Mackey, senior attorney at the Electronic Frontier Foundation, a San Francisco-based nonprofit digital rights group.
“Holding a developer of useful tools accountable for the wrongdoing of others is short-sighted and harms everyone’s privacy online,” Mackey said DL News.
Five year sentence
A court in the Netherlands condemned Pertsev to more than five years in prison. His lawyers on Thursday has appealed.
Since its arrest in 2022 following the US government’s approval of Tornado Cash, a cryptocurrency mixer, industry insiders and legal experts have feared lawsuits that would make anonymizing DeFi payments risky.
Even as the community argued that it was wrong to criminalize coding and software development, Pertsev’s case emerged as a key test. Now that the verdict has been rendered, DeFi will have to adapt.
“It is a watershed moment for privacy and permissionless public blockchains,” said Erwin Voloder, policy manager at the European Blockchain Association.
“In the end, since the code can’t be processed, in this unfortunate case a developer did it.”
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“Alexey is the unwanted martyr.”
— Eléonore Blanc, Crypto Canal
Tornado Cash is a decentralized and open-source protocol that obfuscates crypto transaction history and grants anonymity to its users.
Although its developers designed Tornado Cash as a solution for privacy of otherwise public documents visible on the Ethereum blockchain, it has also served as a tool for laundering illicit funds.
The Dutch court noted that $2.2 billion was laundered through Tornado Cash. North Korean cybercrime organization Lazarus Group used it to hide proceeds from hack attacks on cryptocurrency exchanges and DeFi platforms.
During his trial, Pertsev argued that he could not be held responsible for how others use the tool. And, because it relies on automated smart contracts with open source code, he couldn’t do anything to stop it.
The court ruled that Pertsev and his fellow developers should have thought about how others might abuse Tornado Cash before launching it for the first time in 2019.
“Alexey is the unwanted martyr,” Eléonore Blanc, community organizer and founder of the Amsterdam-based Crypto Canal he wrote on X. “Shame on the Dutch justice system,” he tweeted. “Blind and deaf to true innovation.”
Privacy enhancing technology
Privacy is a core value in the ethos that has driven the cryptocurrency industry.
Harry Halpin, CEO of privacy protection platform Nym, said it is a “tragedy” that developers who create privacy solutions are being jailed for the actions of malicious actors.
Following this logic, bankers would be jailed “since the vast majority of money laundering by state and non-state actors occurs in cash and through the traditional banking system rather than cryptocurrency,” he said. DL News.
“Given that privacy-enhancing technologies are historically embraced by European and Dutch legislation… I see no reason why Alex should not appeal to the European Court of Human Rights in Strasbourg,” Halpin said. “It’s an appeal that would probably win.”
All eyes on the American trial
Pertsev’s appeal could bring his case to a new hearing. For now, all eyes are on the case of Tornado Cash developer Roman Storm.
Storm will go on trial in the United States in September. His motion to dismiss the case was opposed by federal prosecutors, despite support from the largest blockchain trade associations and industry players.
“I hope this doesn’t impact a process that’s completely different from us,” said Laura Sanders, policy counsel for the Blockchain Association. DL News. It is unlikely that the court will be able to use Pertsev’s case as evidence.
The EFF’s Mackey, however, earlier said DL News that the outcome of Pertsev’s trial could prefigure Storm’s.
Meanwhile, the chilling effect already seems to be underway.
“There has been more hesitancy to develop in the United States, and I know a lot of developers and entrepreneurs are thinking about moving out of the United States, which is a very unfortunate outcome,” said Marisa Coppel, chief legal officer of the Blockchain Association.
Inbar Preiss is DL News’ regulatory 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.