U.S. prosecutors are considering charges against Dragonfly Capital's Tom Schmidt and other partners connected to their investment in the developer behind Tornado Cash. This development arose during the criminal trial of Tornado Cash developer Roman Storm. Dragonfly invested in Pepper Sec Inc., owned by Tornado Cash developers, in 2020. Federal authorities executed a raid at Schmidt's home and seized his devices as part of their investigation. In response, Dragonfly co-founder Haseeb Qureshi stated that they received a DOJ subpoena and have cooperated fully with the investigation, asserting their compliance with the law and expressing confidence against any charges. The Tornado Cash platform, created in 2019, acts as a coin mixer to obscure transaction origins, which has drawn scrutiny in light of its alleged use for money laundering by criminals. The legal implications of the case could set precedents for developers of decentralized applications and their responsibilities regarding user activities. The DOJ's investigation indicates growing scrutiny of the intersections between venture capital and decentralized finance.

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