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Tornado Cash Developer Sentenced to Prison for Privacy Software Development

by Tatjana
5 minutes read

Tornado Cash Developer Sentenced to Prison for Writing Privacy Software

On May 14, Alexey Pertsev, a lead developer of Tornado Cash (TC), was found guilty of money laundering by a Dutch court. He was sentenced to sixty-four months in prison. Tornado Cash is a privacy-preserving protocol for the Ethereum blockchain. It allows users to deposit funds and withdraw them to different addresses, making it hard for others to track financial activity. Since TC is noncustodial, users control their own money, and developers like Pertsev can’t control how people use the TC smart contracts.

Why Tornado Cash Was Targeted

Because of its privacy features, Tornado Cash was sanctioned by the Office of Foreign Assets Control (OFAC) in August 2022. The U.S. government banned its use by U.S. citizens, citing money laundering and terrorist financing concerns. Shortly after, Pertsev was arrested in the Netherlands. Roman Storm and Roman Semenov, other lead developers of TC, were also arrested by U.S. authorities in August 2023 for money laundering and sanctions violations.

Impact of Pertsev’s Sentence

Pertsev’s sentence sets a dangerous precedent. It threatens developers’ freedom to write open-source code and users’ ability to transact privately. The judge claimed Pertsev was guilty because TC can be used by others for money laundering. This ruling implies that any privacy-preserving software, like Tor or Signal, could lead to similar charges against their developers.

Privacy-Preserving Financial Tools

The court argued that it is common knowledge that privacy-preserving financial tools can be exploited by criminals. However, this logic is flawed. Just because cars can be used recklessly doesn’t mean car manufacturers are responsible for accidents. Similarly, Pertsev shouldn’t be punished for how others use his software.

The judge also suggested that Pertsev should have made the software more compliant with the law. However, TC allows users to prove their funds are from legal activities and prevents deposits from known sanctioned addresses. Even so, technically savvy users can bypass these measures and interact directly with the smart contract, which the court said made Pertsev’s situation worse.

Government Control and Financial Surveillance

Regulators want developers to create software that the government approves of. This control over software development is a threat to free speech. The government’s actions against TC resemble historical instances where authorities punished creators for their work. For example, the Inquisition punished intellectuals for writing books that challenged the Church, and Nazis destroyed art they deemed “degenerate.”

Today, Western governments jail people for writing software they don’t like. Open-source software boosts freedom and helps people avoid financial surveillance, which threatens government control.

The Role of FATF

The sentence against Pertsev also mentioned the Financial Action Task Force (FATF). FATF is an international organization that sets standards to prevent illegal activities like money laundering. Countries must follow FATF’s recommendations or face sanctions. These recommendations often push for more financial surveillance, treating all transactions as suspicious by default.

If financial privacy is seen as a risk, writing privacy-preserving software is viewed as a threat to regulatory control. This is why the definition of “money laundering” is being expanded to include developers like Pertsev, who merely wrote software that others can use independently.

The Importance of Privacy-Preserving Software

The theory of the division of powers states that the executive, legislative, and judiciary branches must be separate to ensure checks and balances. However, Pertsev’s sentence shows that the judiciary can end up enforcing the will of the other branches. The Bank Secrecy Act, which established most anti-money laundering laws in 1970, came just before the fiat monetary system began.

In a fiat system, money’s value depends on public trust in political institutions. To maintain this trust, governments need to prevent people from opting out of the system. Without financial surveillance, the current fiat system might collapse. Pertsev’s arrest aims to make an example of him and scare people away from using privacy-preserving software.

Supporting Privacy and Open-Source Development

Governments fear privacy because a privacy-conscious population can challenge their power. The best response to this is to continue using and supporting privacy-preserving software. Liberty should never be taken for granted. It must be protected by supporting developers who create privacy tools and by using these tools to maintain financial privacy without government permission.

The fight for privacy is crucial. We must support open-source developers and continue to use privacy-preserving software to protect our freedom. Alexey Pertsev’s case is a reminder that the battle for financial privacy and freedom is ongoing.

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