The U.S. government is contemplating criminal charges against Dragonfly Capital Partners’ Tom Schmidt and others related to their investment in Tornado Cash developer Pepper Sec in 2020. This announcement came during the trial of Tornado Cash creator Roman Storm, who faces substantial prison time for allegedly facilitating money laundering through his coin mixer service. Dragonfly has claimed compliance with U.S. law and is preparing to defend itself vigorously against what it calls groundless charges. Schmidt's devices were seized, and during the trial, he invoked the Fifth Amendment, protecting him from self-incrimination. The controversy revolves around whether software developers should be held liable for the actions of users on their platforms, a key issue that could impact the broader cryptocurrency landscape. The case highlights the U.S. government's scrutiny of cryptocurrency operations and the legal ambiguities surrounding decentralized finance.

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