Today, the Southern District of New York (SDNY) conducted a conclusive status conference hearing for the Tornado Cash case, with the trial set to commence this Monday, 7/14.
The hearing took place virtually, attended by Judge Katherine Polk Failla (who is presiding over the trial), Tornado Cash co-founder Roman Storm, and representatives from both the defense and prosecution.
Storm is confronted with three allegations: conspiracy to engage in money laundering, conspiracy to manage an unlicensed money transmitting operation, and conspiracy to breach sanctions.
The primary subjects deliberated in the hearing included:
- the rationale for the New York court being chosen as the trial venue
- Storm’s interaction with a Bloomberg journalist who reported on Tornado Cash in March 2020
- whether actions taken by the Tornado Cash co-founders and developers to maintain Tornado Cash’s operation furthered the conspiracies in Storm’s indictment
- the admissibility of data retrieved from Tornado Cash co-founder Alexey Pertsev’s phone
- how Judge Failla intends to prioritize Storm’s management of a profit-driven business over technical aspects of Tornado Cash’s crypto mixing software
Prior to discussing these topics, Judge Failla provided some significant details concerning the trial’s proceedings.
Details Regarding the Trial
The trial is scheduled to initiate Monday morning at 9:30 AM EST, with jury selection as one of the initial agenda items.
Judge Failla emphasized that the trial will not be recorded, aired, or retransmitted. (I’ll be present to cover the majority, if not all, of it, though!)
She also mentioned her desire for the trial to conclude within three weeks, although she expressed skepticism about this timeline, noting she may need to take time off in early August to honor her unwell mother’s birthday.
Moreover, Judge Failla indicated that opening statements would not commence until Tuesday, 7/15.
Why the Tornado Cash Trial Is Taking Place in the SDNY
As per the prosecution, the trial is occurring in the SDNY because Storm managed a website that enabled Tornado Cash transactions from New York City for a specific period.
The prosecution contended that Storm also regularly communicated with one of the venture capital (VC) principals who financed Tornado Cash and happened to be located in New York City at the time.
Furthermore, the prosecution asserted that Storm consistently made requests to this VC principal, which extended beyond funding matters.
Storm ‘Corrected’ a Bloomberg Reporter
The prosecution elaborated that, in March 2020, Storm reached out to a Bloomberg journalist who had penned a piece on Tornado Cash to persuade the journalist to alter the coverage so that it wouldn’t cast Tornado Cash in a negative light.
They argued that Storm’s dialogue with the journalist and persuading said journalist to modify the story “rendered the story inaccurate.”
The defense countered, asserting that Storm only approached the journalist to ensure that “proper amendments” were made to the article.
Storm refrained from addressing this issue during the hearing.
All in Furtherance of the Charged Conspiracies?
The prosecution suggested that all efforts made by Storm and his co-founders in running their profit-driven enterprise utilizing the Tornado Cash technology contributed to the conspiracies with which Storm has been charged.
One effort highlighted by the prosecution was Storm and his co-founders promoting U.S.-based Tornado Cash users to utilize the service, thus enlarging the capital pool for the money that North Korean hackers processed through the software (enhancing the ease of fund anonymization).
The judge challenged this assertion from the prosecution, requesting clarification on whether they believed that actions by the Tornado Cash co-founders to sustain their operations were indeed supportive of the conspiracies with which Storm has been charged.
This moment caused the prosecution to hesitate, and during this pause, one of the defense attorneys moved to dismiss the indictment against Storm due to lack of venue.
Judge Failla promptly denied the motion, expressing that such a request had vexed her to the point of feeling “an outbreak of hives.”
Graykey Progress Report
Throughout the hearing, Judge Failla brought up the Graykey data extraction from Alexey Pertsev’s phone. (Pertsev was sentenced to five years in prison in the Netherlands for his role in Tornado Cash.)
Towards the end of the hearing, she inquired if either the prosecution or defense had questions regarding Pertsev’s phone, subsequently questioning the admissibility of the extracted data. She decided to postpone her ruling on this issue until trial.
She then requested both sides to examine the disputed data as well as the method through which it was obtained and prepare to address the matter during the trial.
Focusing on the Front End
Judge Failla made it clear that at least the outset of the trial won’t center on Tornado Cash as a mixing service, but rather on the website, the front-end interface, that Storm developed to enable transactions via the Tornado Cash software.
“[We’re] not going to focus on crypto mixing,” remarked the judge.
However, she noted she was awaiting a response from the defense regarding her previous submissions to the court concerning crypto mixing services.
Witnesses and Motions In Limine
In addition to the aforementioned topics, the hearing’s participants deliberated on the witnesses involved in the case and the supplementary motions in limine (which remain undisclosed before or during a trial due to being irrelevant, prejudicial, or inadmissible).
No witness names were revealed during the hearing, but the prosecution mentioned that “witness #1” had recently been identified and that they had conducted an interview with this witness.
The judge acknowledged the defense’s plea to exclude certain materials concerning witness #1.
Several motions in limine were discussed. During this segment of the hearing, the judge advised the prosecution that the witnesses should refrain from discussing the emotional distress resulting from having the funds they funneled through Tornado Cash frozen.
Instead, she expressed a preference for witnesses who experienced fund freezing to share whether they contacted the Tornado Cash team in attempts to retrieve their funds.
What Wasn’t Addressed
At no point during today’s hearing was it mentioned that the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) has excluded Tornado Cash from its sanctions list, nor was it noted that a court recently dismissed Coin Center’s appeal to OFAC regarding this issue.
