Roman Storm Trial: U.S. DOJ Weighs Charges Against Crypto VC Firm Dragonfly

The Roman Storm trial involving the Tornado Cash co-founder is witnessing a new twist with the U.S. Department of Justice (DOJ) considering whether to include some Draginfly’s executives in the case. The crypto VC firm has ties to the crypto mixer due to its investment in the platform way back in 2020.

Roman Storm Trial Sees New Twist With Dragonfly Involvement

In an X post, Journalist Eleanor Terrett revealed that the DOJ is still considering changes against an unspecified number of people at the crypto VC firm Dragonfly. She noted that this includes not only the General Partner Tom Schmidt, according to the transcript from Roman Storm’s hearing today.

It is worth noting that the Roman Storm Trial centers around the founder of Tornado Cash, who is facing charges of conspiracy to commit money laundering and sanctions evasion. The case is still pending despite the U.S. government agreeing to drop the lawsuit involving the crypto mixer over sanctions that the U.S. Treasury had earlier imposed on it.

Meanwhile, Dragonfly’s involvement in the Roman Storm trial stems from the VC firm’s investment in the platform. During the period when the VC firm was backing the crypto mixer, Storm and his fellow co-founders had shared emails with the VC firm’s executives, Haseeb and Schmidt.

Notably, there was an email in which Storm and his team had asked for feedback on adding KYC to the platform. Storm wanted Schmidt to testify regarding this, but he invoked the Fifth Amendment, which protects against self-incrimination.

Terrett noted that it is still unclear whether the DOJ will grant Schmidt immunity or whether he will testify if that happens. She added that there will be more developments when the trial resumes next week.

The Roman Storm Trail holds significant interest for the crypto community, particularly in its implications for the liability of developers in relation to the DeFi platforms they create. This liability is one of the issues that the crypto market structure bill aims to address.

Dragonfly’s Managing Partner Breaks Silence

In an X post, Dragonfly’s managing partner Haseeb broke his silence on the reports that the DOJ is weighing charges against them in the Roman Storm trial. He noted that they had invested in Tornado Cash due to their belief in the importance of open-source, privacy-preserving technology.

He added that they had also sought a legal opinion, which confirmed that the crypto mixer complied with the law. Hasseb also remarked that they believe that a lack of privacy remains one of crypto’s largest unsolved problems.

As such, they stand by their investment in Tornado Cash despite the Roman Storm trail. However, he noted that they did not operate or exercise any control over the crypto mixer. Hasseb also claimed that charging a venture firm for a portfolio company’s alleged misconduct would be unprecedented.

The Dragonfly managing partner also revealed that they had received a DOJ subpoena in 2023 and had fully cooperated with the government’s investigation of Tornado Cash. Meanwhile, the prosecutors had told them back that there weren’t targets of their investigation.

As such, he believes that the government’s statement in the hearing today was simply to undermine the Tornado Cash co-founder’s defense. Haseeb added that they probably wanted to make it more difficult for Schmidt to testify in the Roman Storm trial.

The managing partner again declared that bringing charges against Draginfly would be “outrageous” and contrary to the facts and the law. He added that it would induce a “chilling effect” on all investment into crypto and privacy platforms in the U.S. Haseeb doesn’t believe the DOJ will follow through with the charges. However, if they do, he declared that they are ready to “vigorously defend” themselves.