DOJ pushes Tornado Cash case forward as Treasury abandons mixer reporting rule

Prosecutors defend New York venue in Roman Storm case

Federal prosecutors filed an October 5 brief asking a New York judge to reject Roman Storm's challenge to the case's venue. Storm co-founded Tornado Cash, a cryptocurrency mixer that obscures the trail of digital transactions.

In the filing, prosecutors cited a recent D.C. Circuit appeal involving Bitcoin Fog, a different crypto mixing service, arguing it supports holding Storm's trial in New York. They pointed to a Manhattan customer who deposited funds into Tornado Cash, saying those deposits helped make criminal funds harder to trace.

Storm faces two counts — money-laundering conspiracy and money-transmission conspiracy — in addition to an August 2025 conviction on one money-transmission count that carries a maximum sentence of five years.

Key details

• The DOJ asked Judge Katherine Polk Failla to reject Storm's venue challenge on the two remaining counts.
• Prosecutors rely on a September 25 D.C. Circuit decision in the Bitcoin Fog case as supporting precedent.
• Storm's retrial is scheduled for April 26, 2027, following a pending acquittal motion and requested continuance.
• Treasury's FinCEN simultaneously moved to withdraw its 2023 proposed rule requiring enhanced reporting for international cryptocurrency mixers.

What the Treasury withdrawal means

On the same day the DOJ filed its brief, FinCEN published a notice withdrawing its proposed reporting rule for cryptocurrency mixers. The agency cited concerns about a "chilling effect on legitimate activity" and the burden on financial institutions.

FinCEN acknowledged that lawful financial privacy remains valid while stating it would continue monitoring for money laundering and terrorist financing. The withdrawal addresses only an administrative reporting proposal — it does not repeal any criminal laws or decide Storm's case.

DOJ's own shifted stance on mixers

In April 2025, Deputy Attorney General Todd Blanche issued a memo directing prosecutors to move away from targeting mixers for their users' conduct or unwitting regulatory violations. The memo called for review of ongoing cases.

However, the memo explicitly excluded charges under a statute covering funds known to come from crime or intended for unlawful activity. DOJ official Matthew Galeotti later said that qualifying open-source software — truly decentralized, solely automating peer-to-peer transactions, with no third-party custody — would be protected from new charges under that provision. Other charges could still apply where criminal intent exists.

That guidance did not vacate Storm's existing conviction.

What remains disputed

At the core of the case is whether Storm's work building and maintaining Tornado Cash constitutes criminal conduct. Prosecutors argue he knowingly ran a service that transmitted criminal proceeds. Storm contests that characterization, describing potential imprisonment as punishment "for writing code."

During an August 2025 hearing, prosecutor Ben Arad argued that even legitimate deposits helped conceal criminal funds, while distinguishing innocent depositors' knowledge from that of Storm and his alleged co-conspirators. Judge Failla pressed questions about whether the government's broader theory established willful conduct, and Arad later emphasized Storm's active steps to maintain and improve the service rather than merely leaving it running.

Why this matters for privacy developers

The split between Treasury's policy retreat and the DOJ's continued prosecution highlights an unresolved tension in crypto regulation. While federal agencies now recognize lawful use of mixers for financial privacy, criminal prosecutions of developers who built those tools are still moving forward.

The outcome of Storm's venue challenge and upcoming retrial could shape how far liability extends for open-source developers whose software is used for both legitimate and illicit purposes.

Sources

• CryptoSlate