U.S. prosecutors are contemplating charges against Dragonfly Capital Partners and its executives, including Tom Schmidt, due to their investment in Pepper Sec Inc., a company owned by Tornado Cash developers. This announcement was made during the criminal trial of Roman Storm, a Tornado Cash developer accused of operating an unlicensed money-transmitting business and violating U.S. sanctions. Following a subpoena from the DOJ, Dragonfly has cooperated with the investigation, expressing confidence in their compliance with the law. The firm's co-founder, Haseeb Qureshi, stated that they find the potential charges to be groundless and are prepared to defend themselves vigorously. Prosecutors noted that communications between Dragonfly and Tornado Cash’s developers suggest that advisers discussed integration of know-your-customer (KYC) compliance with Tornado Cash. The outcome of Storm's trial could set significant legal precedents regarding the responsibilities of software developers in the blockchain space, particularly concerning the actions of users on their platforms.

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