Dragonfly Capital Faces Potential Charges Over Tornado Cash Investment
Dragonfly Capital, a prominent cryptocurrency venture firm, may be facing legal trouble related to its early investment in Tornado Cash, a decentralized crypto mixer. Managing Partner Haseeb Qureshi confirmed the possibility of charges from the U.S. Department of Justice (DOJ).
DOJ Investigates Dragonfly’s Ties to Tornado Cash Founder
The potential legal action stems from Dragonfly’s early involvement with Tornado Cash and its co-founder, Roman Storm. Assistant U.S. Attorney (AUSA) Thane Rehn indicated during a court session that investigations into Dragonfly Capital, including General Partner Tom Schmidt and Managing Partner Haseeb Qureshi, could be initiated.
Qureshi addressed the situation in a post on X, emphasizing that Dragonfly’s initial support for Tornado Cash was based on its privacy-focused technology and adherence to FinCEN regulations. “We made this investment because we believe in the power of privacy-preserving technology,” Qureshi stated.
He also clarified that Dragonfly had no involvement in the charges against Tornado Cash or Roman Storm and exerted “no control” over the protocol’s operations.
The DOJ indicted Storm and co-founder Roman Semenov in August 2023 on charges of money laundering, conspiracy to violate sanctions, and operating an unlicensed money transmitting business. The protocol was accused of facilitating over $1 billion in money laundering transactions, allegedly connected to North Korea’s Lazarus Group.
While the DOJ withdrew part of the original indictment against Storm in May, they are proceeding to trial with the remaining claims. The trial, which began in early July, has drawn Dragonfly and its partners Schmidt and Qureshi into the spotlight.
Emails Surface in Court
AUSA Rehn reportedly presented emails in court between Roman Storm, other Tornado Cash co-founders, and Dragonfly. These emails reportedly focused on Storm and his team seeking feedback on adding KYC (Know Your Customer) measures to the protocol.
Qureshi expressed his disagreement with the recent developments, stating that the firm is prepared to defend itself if charges are filed. “We don’t believe the DOJ will actually bring such absurd and baseless charges. But if they do, we intend to defend ourselves vigorously,” Qureshi wrote.
Several figures in the cryptocurrency industry, including Ethereum co-founder Vitalik Buterin, have donated to Roman Storm’s defense fund.
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