Federal prosecutors are contemplating charges against Dragonfly Capital Partners, specifically Tom Schmidt and others, due to their investment in Tornado Cash's development team. This announcement was made during the trial of Tornado Cash developer Roman Storm, who faces significant legal challenges including accusations of running an unlicensed money-transmitting business. In 2020, Dragonfly invested in Pepper Sec, which is connected to Tornado Cash developers. Responding to the situation, Dragonfly co-founder Haseeb Qureshi asserted the firm has complied with the law and expressed confidence against what they consider groundless charges. Prosecutors are investigating communications between Dragonfly and Storm's team regarding compliance measures. Schmidt’s devices were seized during the investigation, and he invoked the Fifth Amendment when called to testify. The case centers on whether software developers are liable for user activities on their platforms and highlights ongoing debates around privacy and responsibility in the cryptocurrency sector.

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