- Prosecutors in the case against Tornado Cash developer, Roman Storm, have told the judge they’re considering bringing charges against employees of Dragonfly Capital, an early investor in the privacy preserving application.
- Dragonfly general partner, Tom Schmidt and managing partner, Haseeb Qureshi are reportedly both in the firing line after leading the firm’s 2020 investment in Tornado Cash and subsequently becoming involved in its development, including by making UI updates.
- Qureshi took to X to defend Dragonfly’s actions, adding that if the government does decide to press charges it will harm investment in the US crypto industry.
Prosecutors in the case against Tornado Cash developer, Roman Storm, told a federal judge in open court Friday that they’re considering filing charges against employees of a VC firm that invested in the platform, Dragonfly Capital, including the firm’s general partner Tom Schmidt.
The prosecutors told the judge that Schmidt and another employee, managing partner Haseeb Qureshi, had potentially committed crimes stemming from their 2020 investment in, and subsequent involvement with, Tornado Cash.
The possibility of charging the Dragonfly employees was reportedly raised during a discussion between prosecutor Nathan Rehn and District Judge Katherine Polk Failla of the Southern District of New York (SDNY) during a break in the trial against Storm. Storm currently faces up to 45 years in prison if found guilty on charges of conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business and conspiracy to violate international sanctions.
During testimony against Storm the prosecution introduced a trove of text messages between the Tornado Cash developer and Schmidt and Qureshi — which apparently showed that Schmidt and Qureshi profited from their investment in Tornado Cash and were themselves involved in the development of the software by making updates in the app’s interface.
In response, Storm’s defence lawyers floated the possibility of Schmidt testifying to give context to and clarify the purpose of these messages. However, the prosecution declared they wouldn’t offer Schmidt or other Dragonfly employees immunity from their testimony later being used against them, resulting in Schmidt refusing to testify in Storm’s defence.
“Are you looking at possibly prosecuting everyone at Dragonfly?” Judge Failla asked prosecutor Nathan Rehn, according to Inner City Press.
Rehn replied, “not everyone, but Schmidt”, and another unnamed individual, believed to be Qureshi.
Related: Defence Seeks Mistrial in Roman Storm Trial Over Questionable Tornado Cash Evidence
Qureshi Defends Dragonfly and Tornado Cash
Following the day’s legal wrangling, Qureshi took to X / Twitter to post a defence of Dragonfly and argue for the right of privacy-preserving tools, like Tornado Cash, to exist.
Dragonfly invested into PepperSec, Inc., the developers of Tornado Cash, in August of 2020. We made this investment because we believe in the importance of open-source privacy-preserving technology.
Haseeb Qureshi, Dragonfly CapitalQureshi added, “on counsel’s advice, we have refrained from public comment. But we can no longer remain silent.”
“We believe deeply in Americans’ right to privacy, and the lack of it remains one of crypto’s largest unsolved problems. We therefore stand by our investment. We did not operate or exercise any control over Tornado Cash, we had no contact with any malicious users, we always encouraged our portfolio companies to follow the law, and we maintain that Tornado Cash itself has a lawful right to exist,” he said.
Related: Crypto Mixer Co-Founder Roman Storm Appeals for $500K “Code as Free Speech” Legal Fund
Qureshi further argued that bringing charges against Dragonfly would harm investment in the American crypto industry, putting the brakes on the development of much-needed privacy-preserving technology.
After all of this time—years later—bringing charges against Dragonfly would be outrageous, contrary to the facts and the law, and would induce a chilling effect onto all investment into crypto and privacy-preserving technologies in America.
Haseeb Qureshi, Dragonfly CapitalHe said that if charges are brought against the firm and/or its employees, they “intend to vigorously defend” themselves.
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