BREAKING: Dutch court finds Tornado Cash developer Alexey Pertsev guilty of money laundering.

A Dutch court has convicted Alexey Pertsev, the developer of Tornado Cash, of laundering $1.2 billion in illicit assets using the platform. Pertsev, a 31-year-old Russian national residing in the Netherlands, faces sentencing following the verdict, with his legal team having a 14-day window to appeal.

Legal experts anticipate that this ruling will significantly impact the trajectory of privacy in decentralized finance (DeFi), potentially instigating a chilling effect on the development of open-source software providing financial privacy tools. Throughout Pertsev’s trial, which began in March, prosecutors argued that the Tornado Cash developer failed to take adequate measures to prevent criminal misuse of the platform. Pertsev’s defense emphasized the open-source and automated nature of Tornado Cash’s smart contracts, maintaining that holding him accountable for users’ actions contradicted the platform’s anonymous and independent design.

Tornado Cash operates as a decentralized protocol aimed at obscuring transaction histories on the Ethereum blockchain. The trial underscored the tension between anti-money laundering laws and the innovative potential of blockchain-based financial platforms, particularly concerning anonymity. Pertsev’s defense stressed that neither he nor other contributors could control how users employed the open-source smart contract code, emphasizing Tornado Cash’s decentralized organizational structure.

Prosecutors, however, contested the assertion that Tornado Cash lacked leadership, characterizing it as an enterprise complicit in laundering crypto assets obtained through various hacks and heists, including those perpetrated by the North Korean cybercrime group Lazarus Group. The group stands accused of draining multiple crypto exchanges and protocols, including the record-breaking $625 million exploit of Axie Infinity Ronin Bridge in March 2022.

Following the U.S. Treasury’s sanctioning of Tornado Cash in August 2022, Pertsev was arrested and later charged with money laundering in November 2022. Although the crypto industry has rallied behind Pertsev in advocacy efforts to uphold privacy and support open-source tech development, the legal proceedings have been largely opaque, with limited international accessibility due to the trial being conducted in Dutch.

While Pertsev’s case is distinct from that of fellow Tornado Cash developer Roman Storm, who faces similar charges in the U.S., some experts speculate that Pertsev’s guilty verdict may signal Storm’s potential fate. Storm’s trial is scheduled for September 23.