Judge in Tornado Cash Case He issued an oral ruling today, denying both the defense’s motion to compel discovery and their motion to dismiss the charges. This represents a major setback for the defense, and the judge’s reasoning may not bode well for developers and projects moving forward.
Motion to force
The defense’s motion to compel discovery sought access to a wide range of government communications, including exchanges with foreign authorities under the Mutual Legal Assistance Treaty (MLAT) and with domestic agencies such as the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network. (Financial Crimes Enforcement Network). Citing Federal Rule of Criminal Procedure No. 16, the defense said this material was essential to understanding the government’s case and could include exculpatory evidence. However, the judge explained that Rule 16 imposes a strict requirement: the defense must show that the information requested is important to its case, not merely speculate on its potential usefulness.
The court rejected the defense arguments as speculative, stating that references to what the information “may” or “could” reveal did not meet the necessary standards of materiality. For example, the defense argued that mutual legal assistance communications with the Dutch government might shed light on evidence against Tornado Cash or reveal government investigative theories. The judge found this reasoning unconvincing, stressing that materiality cannot be proven through conjecture or vague assertions.
Likewise, the court denied the defense’s request for all communications between the government, OFAC, and FinCEN. Although the defense claimed that these documents were necessary to understand the theories of the government and potential witnesses, the judge concluded that the defense failed to prove how these communications were directly relevant to the charges. The court emphasized that the burden was on the defense to show a specific connection between the requested documents and their defense strategy, a burden they were unable to meet.
When the defense proposed an in-camera review — a private examination by a judge of the requested documents — to determine their relevance, the court refused. The judge said that granting such a request based on speculative assertions would set a dangerous precedent, effectively mandating secret reviews in all criminal cases when a defendant speculates about the importance of certain documents. The judge stressed that this would undermine the purpose of Rule 16 and turn the pretrial discovery process into an unfettered search for potentially useful evidence.
The defense also raised concerns under Brady vs. MarylandUnder the pretext that the government may be withholding evidence of exculpation or accountability. While the court recognized the government’s obligations under BradyShe found no indication of neglect of these duties. Without concrete evidence that the government was withholding information, the court saw no reason to compel the disclosure of additional information. The judge cautioned that although the defense’s arguments were theoretically possible, they lacked the factual support needed to justify the court’s intervention. But she said that if she later found that the government had “interpreted its obligations too narrowly”, there would be “unfortunate consequences for their case”.
Motion to reject
The motion to dismiss presented a more important set of issues. The focus of the defense’s argument was the definition of “money sender” under the Bank Secrecy Act (BSA). The defense asserted that Tornado Cash did not qualify as a money transfer company because it did not exercise control over users’ funds; It has only facilitated the movement of cryptocurrencies. But the court rejected this narrow interpretation. The judge explained that the scope of the BSA did not require control of the funds; Tornado Cash’s role in facilitating, anonymizing and transferring cryptocurrency was enough to bring it within the scope of the law. The judge likened Tornado Cash to custodial mixers, which are money carriers.
What further complicated the defense’s argument was their reliance on… FinCEN Guidelines 2019which uses a four-factor test to determine whether a wallet provider is a money sender. The defense argued that this directive, which included a “full independent control” standard, should apply to Tornado Cash. The court disagreed, noting that this standard is specific to wallet providers and does not extend to mixers like Tornado Cash. As a result, Tornado Cash’s lack of “full independent control” over the funds was not relevant to its classification as a money transfer company.
Another key point in the Court’s analysis is the distinction between expressive and functional law under the First Amendment. The defense argued that putting Storm on trial for his involvement with Tornado Cash was tantamount to punishing him for writing code, which they claimed was free speech. The judge acknowledged that although the code could be considered expressive, specific use of the code to facilitate illegal activities — such as money laundering or evade sanctions — fell outside the bounds of First Amendment protections. The judge stressed that the court must focus on behavior permitted by law, not just the law itself. Even under intermediate scrutiny, which applies to content-neutral restrictions on expression, the judge found that the government’s interests in preventing money laundering and regulating unauthorized money transfers justified the restrictions imposed by the relevant laws.
The court also addressed concerns about the immutability of Tornado Cash’s smart contracts, an issue raised by both parties. The judge acknowledged that there was a dispute over the facts but noted that it was not a determining factor in the current petition. However, the issue of consistency may play a role at trial in determining the extent of Storm’s control over the service and his responsibility for its operations.
In concluding remarks, the judge emphasized that while using code to communicate ideas may be protected under the First Amendment, using such code to facilitate illegal activities is not. This distinction is crucial in the context of emerging technologies such as blockchain, where the line between speech and behavior can be blurred. The court’s ruling serves as a reminder that the legal system is prepared to hold participants in the digital economy accountable, even as it grapples with the complexities associated with applying traditional legal principles to new and evolving technologies.
The full text of the judgment will be published once it has been prepared by the court reporter.
This is a guest post by Colin Crossman. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
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