The U.S. Department of Justice is contemplating criminal charges against Dragonfly Capital's Tom Schmidt and other partners related to their 2020 investment in Tornado Cash developer Pepper Sec Inc. This revelation came during the criminal trial of Tornado Cash developer Roman Storm, where Assistant U.S. Attorney Thane Rehn indicated potential charges. Dragonfly has expressed confidence in their compliance with the law and plans to defend against what they describe as groundless allegations. Schmidt's devices were seized, and his home was raided amid this investigation. Tornado Cash, a decentralized Ethereum-based coin mixer designed to obscure cryptocurrency transactions, has been under scrutiny for allegedly facilitating money laundering and violating U.S. sanctions. Storm faces substantial prison time if convicted. The case raises critical questions about the legal responsibilities of software developers concerning their code and the users of their platforms.

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