Federal prosecutors filed an Oct. 5 letter urging Judge Katherine Polk Failla to reject a venue challenge from Tornado Cash co-founder Roman Storm, even as the Treasury Department moves to withdraw a broad reporting proposal targeting cryptocurrency mixers.
The ongoing legal battle highlights the sharp divide between administrative policy updates and criminal enforcement against privacy software developers.
Key Takeaways
- Prosecutors rely on the Sept. 25 United States v. Sterlingov ruling to support venue in the Southern District of New York.
- Roman Storm faces an April 26, 2027 retrial following an August 2025 conviction carrying a 5-year statutory maximum.
- FinCEN filed an Oct. 5 notice withdrawing its 2023 administrative reporting proposal for crypto mixers to prevent chilling legitimate activity.
- Justice Department guidelines retain authority to prosecute developers under section 1960(b)(1)(C) if criminal intent is alleged.
SDNY Prosecutors Rely on Bitcoin Fog Precedent
Southern District of New York prosecutors argue that venue is proper for money-laundering and money-transmission conspiracy counts against Roman Storm. They cite the D.C. Circuit's Sept. 25 decision in United States v. Sterlingov, which involved the Bitcoin Fog mixer, as persuasive authority.
To establish venue, prosecutors point to Manhattan customer Shakeeb Ahmed, claiming his deposits enlarged the mixer's anonymity pool and made funds harder to trace. During an April 9, 2026 hearing, prosecutor Ben Arad argued that Storm and his co-conspirators took active steps to maintain and improve the protocol rather than leaving pools idle. Storm, who already faced an August 2025 conviction on one count carrying a 5-year maximum, had his retrial scheduled for April 26, 2027, by an Aug. 25, 2026 court order.
FinCEN Policy Shift vs. DOJ Prosecution Rules
While prosecution continues, Treasury's Financial Crimes Enforcement Network (FinCEN) filed a withdrawal notice on Oct. 5 for publication on Oct. 6. The notice cancels a 2023 proposal for enhanced recordkeeping on international mixing, citing burdens on financial institutions and a chilling effect on lawful activity.
However, this policy shift does not extinguish criminal charges. An April 7, 2025 memo by Deputy Attorney General Todd Blanche directed prosecutors away from charging mixer users for unwitting regulatory violations, but explicitly preserved section 1960(b)(1)(C) for funds known to originate from crime. Furthermore, August 2025 remarks by DOJ official Matthew Galeotti specified that while non-custodial open-source code receives protections, criminal charges remain active where intent is proven. Posting on X as @rstormsf, Storm criticized the government for punishing him "for writing code." While some have cited Donald Trump's Jan. 21, 2025 pardon of Ross Ulbricht, that executive clemency does not establish a blanket exemption for software authors, especially as law enforcement continues cracking down on complex laundering networks.
Why It Matters
This case highlights an emerging split between federal regulatory policy and criminal enforcement strategy. While FinCEN acknowledges that administrative reporting burdens on mixing tools can suppress legitimate financial privacy, the DOJ is signaling that developers remain legally exposed if their software facilitates illicit capital flows. The outcome of Storm's retrial will establish a critical precedent for whether creators of non-custodial protocols can be held criminally responsible for how third parties utilize open-source infrastructure.
