Arbitrum DAO Withdraws Proposal to Fund Tornado Cash Developers’ Legal Defense

In a notable development within the cryptocurrency community, the Arbitrum DAO has withdrawn a proposal aimed at funding the legal defense of Tornado Cash developers Roman Storm and Alexey Pertsev. This proposal had initially sought to allocate approximately $1.3 million worth of ARB tokens from the community wallet to support the developers amidst their ongoing legal battles.

Background and Initial Proposal

The proposal, submitted by a pseudonymous delegate known as DK on March 7, 2024, aimed to provide a “robust legal defense” for Storm and Pertsev, who face serious charges including money laundering and sanctions violations. The proposal also intended to use part of the funds for public relations and advocacy efforts to promote privacy-preserving technologies. However, the proposal was removed at the request of the author, with the specific reasons for this withdrawal remaining undisclosed.

Legal Challenges for Tornado Cash

Tornado Cash, a crypto-mixing service designed to enhance transaction privacy on the Ethereum blockchain, has been at the center of significant legal scrutiny. The platform has been accused of facilitating the laundering of over $1 billion in illicit funds, with connections to the notorious Lazarus Group. These allegations led to the arrest of Pertsev in the Netherlands in August 2022 and Storm’s arrest by the FBI in August 2023. The third co-founder, Roman Semenov, remains at large.

The US Treasury’s sanctions against Tornado Cash in August 2022 froze its assets and prohibited any transactions with the service. This crackdown not only posed legal challenges for the developers but also raised broader concerns about the future of privacy-oriented applications within the crypto ecosystem.

Community and Financial Support Efforts

Despite the withdrawal of the Arbitrum DAO proposal, the crypto community continues to explore alternative methods to support the legal defense of Tornado Cash developers. One such initiative includes collaboration with Coin Center, a non-profit organization dedicated to crypto policy, which aims to contribute to WeWantJusticeDAO’s ongoing campaign. This campaign seeks to raise approximately $100,000 per month to cover legal costs for Storm and Pertsev.

In addition to these efforts, a previous crowdfunding campaign on GoFundMe was terminated in February 2024 due to a breach of the platform’s terms of service, which underscored the difficulties faced by developers seeking financial support through traditional means.

Broader Implications for Crypto-Mixing Services

The legal battles surrounding Tornado Cash have significant implications for the broader category of crypto-mixing services. These services, which are designed to enhance transaction privacy, are now under intense regulatory scrutiny for their potential use in illicit activities. The outcome of the Tornado Cash case could set a precedent for how similar services are treated under the law, influencing future regulatory approaches and the development of privacy-preserving technologies.

Conclusion

The withdrawal of the Arbitrum DAO’s proposal to fund Tornado Cash developers’ legal defense highlights the intricate challenges faced by developers of privacy-focused blockchain projects. As the crypto community continues to seek ways to support Storm and Pertsev, the broader implications for privacy technologies and regulatory compliance will shape the future of the cryptocurrency landscape. The ongoing legal battles and community efforts underscore the dynamic nature of the crypto ecosystem, where innovation often intersects with complex legal and regulatory challenges.