The U.S. Department of Justice (DOJ) is contemplating criminal charges against Dragonfly Capital Partners and its executives, including Tom Schmidt, due to their investment in Tornado Cash developer Pepper Sec Inc. during its 2020 funding. This disclosure occurred during the criminal trial of Roman Storm, a developer linked to Tornado Cash, where Assistant U.S. Attorney Thane Rehn stated that the DOJ is considering pursuing charges. Dragonfly has maintained that it fully cooperated with the investigation, contending that any potential charges would be absurd and groundless. After being called to testify at the trial, Schmidt invoked the Fifth Amendment, creating uncertainty about his obligation to testify. Tornado Cash, an Ethereum-based coin mixer, is under scrutiny for allegedly being used to facilitate money laundering. Storm faces severe penalties, including a potential 45-year prison sentence, for various charges, while the crypto community debates the responsibility of developers for user activities on their platforms.

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