DOJ says Roman Semenov did much more than just write code in response to defense's dismissal motion

Government prosecutors, in a new 111-page motion, have responded to Tornado Cash co-founder Roman Semenov's motion to dismiss the charges of conspiracy and money laundering against him. 

Semenov, who was charged alongside co-founder Roman Storm who remains at large, faces one count of conspiracy to commit money laundering and one count of conspiracy to violate the International Economic Emergency Powers Act, which each carry a maximum sentence of 20 years in prison, alongside a charge of conspiracy to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison.

While crypto investors and industry groups have rallied to Semenov's aid, raising money for his legal defense and filing  amicus briefs in support of Semenov's motion to dismiss the charges, government prosecutors led by U.S. Attorney for the Southern District of New York Damian Williams, in their response, say characterizing Semenov's crime as just writing code obscures his role in promoting and maintaining Tornado Cash, even when he knew it was being used to launder illicit proceeds from hacks. 

Tornado was a "commercial enterprise"

"The Indictment clearly alleges that the Tornado Cash service was a commercial enterprise carried on for profit or finanancial [sic] gain and that the defendant himself profited from its operation through his control, with others, of key components of the integrated Tornado Cash service," the motion reads. 

For example, while it's true that it was possible to access the smart contracts powering Tornado directly, the indictment acknowledges, most users just used the native interface, and 98% of users used the optional relayer network, which was set up and operated by relayers manually whitelisted by Tornado's co-founders until March 2022. While Semenov's motion contested the characterization of Tornado as a money-transmitting business, the prosecutors argue otherwise, writing "...the Tornado Cash service caused all of these actions to take place behind the scenes and without any further action by the customer. Under the ordinary meaning of the term, the Tornado Cash service was transferring funds when it executed customer deposits and withdrawals in this way."

Other actions Semenov and Storm took in order to keep Tornado running included payments to host the site, paying gas for blockchain transactions, "refusing" to implement proper anti-money laundering programs, and maintaining the relayer network and developing new features to keep the service anonymous. Since they performed these actions after becoming aware that Tornado was used to launder the proceeds of several large hacks, the government alleges these actions are part of the conspiracy charged in the indictment. 

One way the government shows that Semenov had knowledge of legally risky behavior is Semenov's own alleged admission: "On April 14, 2022, the day the Indictment alleges that the conspiracy to violate IEEPA began, the defendant sent the other Tornado Cash founders a link to a news article about the FBI’s attribution of the Ronin Hack to the Lazarus Group. In the message, which the defendant sent while fully aware that the Tornado Cash service was laundering proceeds of the Ronin hack, the defendant wrote: “guys we are fucked.”"

Though the Tornado cash developers implemented a UI change to screen out OFAC-sanctioned wallets, the indictment alleges that action was not enough to prevent illicit activity by Lazarus, though the indictment doesn't explain exactly which actions the developers could have taken to stop the immutable smart contracts that make up Tornado. 

"Even though they knew the UI change would be ineffective, they made public statements suggesting they were in compliance with the law," the indictment reads. "Then, despite obtaining confirmation that the UI change was ineffective, the defendant and the Tornado Cash founders took no further action to prevent the Lazarus Group’s continued use of the Tornado Cash Service to launder funds and evade sanctions, which they knew was ongoing."

Not just writing code

While crypto advocacy groups aim to cast the case as a threat to the freedom to write code online, government prosecutors argue they're pursuing a narrower case, writing, "The Government has not charged the defendant with a crime that involves solely writing code or maintaining a website." Prosecutors argue in the filing that this case "...does not present the question of what circumstances, if any, would give rise to criminal liability for a defendant whose only conduct consisted of writing code for smart contracts that were then deployed on the Ethereum blockchain."

But, "the very success of the Tornado Cash service in laundering enormous amounts of criminal proceeds shows the need for restrictions," government prosecutors argue. In fact, the indictment lays out one picture of this success, in the form of $2.7 million in Tornado profit that it says Semenov transferred to cold wallets that have still not been identified. Semenov also accessed Binance using a VPN and an account under a false identity to cash out other Tornado Cash proceeds, the motion alleges. 

Judging Semenov's actions to be legal just because they involved writing computer code would "...undermine the enforcement of not only criminal law, but all regulatory efforts that address conduct using computers or taking place on the Internet," prosecutors wrote.