The U.S. government is weighing potential charges against Dragonfly Capital Partners' Tom Schmidt and colleagues due to their investment in Tornado Cash's developer, Pepper Sec Inc., made in 2020. This revelation emerged during the criminal trial of Tornado Cash developer Roman Storm, where federal prosecutor Thane Rehn stated the investigation is ongoing. Dragonfly has reportedly complied fully with the inquiries, with co-founder Haseeb Qureshi calling any potential charges 'absurd' and pledging to defend against them vigorously. Schmidt invoked the Fifth Amendment during the trial, prompting uncertainty about his testimony. The case raises significant questions about the responsibilities of software developers, especially concerning privacy tools like Tornado Cash, which facilitates anonymous transactions on the Ethereum network. Storm faces severe penalties for allegedly facilitating money laundering and violating U.S. sanctions through Tornado Cash, with the government claiming the platform enabled criminal behavior.

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