The U.S. Department of Justice is contemplating criminal charges against Dragonfly Capital Partners’ Tom Schmidt and his colleagues due to their investment in Tornado Cash developers. Assistant U.S. Attorney Thane Rehn disclosed this during Roman Storm's criminal trial, where the firm had invested in Pepper Sec Inc., associated with Tornado Cash, in 2020. In response to a DOJ subpoena in 2023, Dragonfly expressed their confidence in having complied with the law and dismissed the potential charges as groundless. During the trial, Schmidt invoked the Fifth Amendment when called to testify. Tornado Cash, created in 2019, enables users to mix Ethereum transactions, which has raised concerns over its use in laundering money. The trial raises questions about software developers' legal responsibilities for their platforms. Roman Storm faces severe allegations, including operating an unlicensed money-transmitting business and aiding in money laundering. The DOJ's actions toward Dragonfly are significant as they may impact the broader landscape of software development and investor liability in the blockchain space.

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