The U.S. government is contemplating criminal charges against Dragonfly Capital Partners’ Tom Schmidt and his associates related to their investment in Tornado Cash developers. This announcement came during the criminal trial of Tornado Cash developer Roman Storm. Dragonfly invested in Pepper Sec Inc., owned by the Tornado Cash developers, in 2020. Schmidt's home was raided, and his devices were seized as part of the investigation. Dragonfly's co-founder, Haseeb Qureshi, asserted their innocence, stating they have cooperated with the DOJ, believing the potential charges are unfounded. The ongoing trial is significant as it could set a precedent regarding the legal responsibilities of software developers for user activities. Tornado Cash, established in 2019, is a coin mixer on the Ethereum blockchain designed to enhance transaction privacy. Storm faces severe charges, including operating an unlicensed money-transmitting business and violations related to money laundering and U.S. sanctions, emphasizing the implications for decentralized finance and privacy tools in the cryptocurrency space.

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