The U.S. government is contemplating criminal charges against Dragonfly Capital Partners' Tom Schmidt and his colleagues due to their investment in Tornado Cash's developer, Pepper Sec Inc., from 2020. The announcement came during Roman Storm's trial, where Schmidt was expected to testify but instead invoked the Fifth Amendment. Prosecutors indicated they have obtained Schmidt's devices and conducted a raid on his home as part of the investigation. Dragonfly has expressed confidence in its legal compliance and views the potential charges as baseless, with co-founder Haseeb Qureshi vowing to defend against them vigorously. The trial is significant as it may set a precedent regarding the legal responsibilities of software developers. Tornado Cash, an Ethereum-based coin mixer launched in 2019, has been implicated in facilitating money laundering activities, prompting the government's action against its developers.

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