The U.S. Department of Justice (DOJ) is contemplating criminal charges against Dragonfly Capital Partners and its associates, including Tom Schmidt, for their investment in Tornado Cash developer Pepper Sec. This disclosure was made during the criminal trial of Roman Storm, a Tornado Cash developer, where U.S. federal prosecutors mentioned that Schmidt's devices had been seized and his home was raided as part of the investigation. Dragonfly Capital has stated that it has cooperated fully with the DOJ, expressing confidence that the charges are unfounded. Schmidt invoked the Fifth Amendment during testimony, leaving uncertainty regarding his compelled testimony. Tornado Cash is an Ethereum-based coin mixer that obscures cryptocurrency transactions but has faced scrutiny due to its alleged use in money laundering by criminals. Storm faces severe penalties, potentially up to 45 years in prison for charges like operating an unlicensed money-transmitting business, as concerns about developer liability grow within the crypto community.

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