The U.S. Department of Justice (DOJ) is contemplating bringing criminal charges against Dragonfly Capital Partners and its executives, including Tom Schmidt, for their investment in Pepper Sec Inc., which is linked to the developers of Tornado Cash. This revelation was made during the criminal trial of Tornado Cash developer Roman Storm in New York. The DOJ has been investigating the mixer for allegedly facilitating money laundering through unregistered money transmission. Dragonfly had previously stated that they cooperated fully with the investigation and maintain they followed the law. After being called as a witness, Schmidt invoked his Fifth Amendment right against self-incrimination. Tornado Cash, known for obscuring the source and destination of Ethereum transactions, has been controversial due to its perceived use by criminals. The case could set a precedent regarding the legal responsibilities of software developers for user actions on their platforms.

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