The U.S. Department of Justice (DOJ) is contemplating filing charges against Dragonfly Capital, specifically targeting Tom Schmidt and other partners due to their investment in the developers of Tornado Cash. This revelation emerged during the criminal trial of Tornado Cash developer Roman Storm, where prosecutors disclosed that they had seized Schmidt's devices and conducted a raid on his residence. Dragonfly, which invested in Tornado Cash's founding entity, Pepper Sec Inc., in 2020, claims to have fully cooperated with the investigation and maintains that charges would be absurd. The case explores the legal responsibilities of software developers for user-generated actions on decentralized platforms. Storm faces severe penalties for allegedly operating an unlicensed money-transmitting business and conspiring to launder money related to Tornado Cash, which has been utilized in illicit activities for laundering cryptocurrency. The potential criminal implications for Dragonfly mark significant developments in the evolving landscape of blockchain regulation and venture capital involvement.

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