An Alleged Tornado Cash Developer Was Arrested. Are You Next?

In other words, Tornado is a system that operates autonomously. It’s just something that exists in the world – ready to be put to use like an iPhone, a plane or a pressure cooker. And how often are inventors held liable if their systems are misused? As Mike Dudas pointed out, Mastercard (MA) and SWIFT help process fraudulent transactions everyday.

But this argument is not enough. You won’t get far calling cops hypocrites. Although Tornado was clearly used for more than crime – Elliptic and Chainalysis both estimated upwards of $1 billion worth of crypto can be tied back to hacks or malware, out of the $7 billion deposited since 2019 – it was still a system designed specifically to shift some financial flows outside of the purview of financial regulators.

Cops don’t like that. Shifting financial flows without their knowing much about it. Crypto users can say it’s none of the cops’ business how they use their money, but that’s not how the world works. The world isn’t interested in knowing how or why these systems actually operate.

For goodness sake, the U.S. Treasury said that Tornado was used to launder $7 billion worth of crypto, vastly overestimating that amount, according to the data – either meaning they don’t care about the data or are comfortable saying all money that flows by outside its sights is definitionally laundered.

The question for coders might be where this stops, where contributing to a privacy-preserving app crosses the line into facilitating money laundering. Is contributing to Bitcoin’s Taproot part of a conspiracy to assist money laundering, if it eventually improves bitcoin’s privacy? What about contributing to Monero’s upcoming upgrade?

Bloomberg’s Matt Levine has a catchphrase, “everything is securities fraud,” because anything could be considered securities fraud under the broad definition under which the U.S. Securities and Exchange Commission operates. Gary Gensler, the SEC chairman, applies what he calls a “duck test” to determine what is or isn’t a security – essentially a gut call. The same is true for “wire fraud,” or a financial crime “involving the use of telecommunications or information technology.”

Again, we don’t know why this “supposed” Tornado coder was arrested. He could have been working directly with criminal entities or sanctioned governments to tumble ill-gotten gains on Tornado. Or, he could have been like Virgil Griffith, the Ethereum Foundation developer who traveled to North Korea and was charged with sanctions violations for sharing publicly available information about crypto at a conference.

But Griffith was warned by U.S. state officials before traveling, and he went to North Korea anyway. He may have only been giving an idiot’s guide to Ethereum, but he knew that information was interesting because it was framed as a way to bust sanctions.

When it comes to crypto mixers, the warning is clear enough. There’s little hope remaining that someone can deploy an app, let it run and wash their hands of ownership. Even if it’s strictly up to users what to do with the app, there’s still a person behind the code. And it’s probably better if we don’t know their name.

https://finance.yahoo.com/news/alleged-tornado-cash-developer-arrested-201524752.html