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DOJ Investigates Dragonfly Capital's Ties to Tornado Cash

U.S. prosecutors are contemplating charges against Dragonfly Capital's Tom Schmidt and colleagues related to their investment in Tornado Cash's developer.

This development emerged during the criminal trial of Roman Storm, the creator of Tornado Cash, where Schmidt was slated to be a witness.

Dragonfly's co-founder, Haseeb Qureshi, confirmed the firm received a DOJ subpoena and has been cooperating with the investigation.

While expressing confidence in their legal compliance, Qureshi stated they would vigorously defend against what he termed "absurd" charges.

Schmidt's recent court appearance saw him invoke the Fifth Amendment, although it remains uncertain whether he will ultimately testify.

The case against Dragonfly unfolds against the backdrop of ongoing legal scrutiny of Tornado Cash, an Ethereum-based coin mixer used for obfuscating cryptocurrency transactions.

Storm faces severe penalties, potentially up to 45 years in prison, for several charges including operating an unlicensed money-transmitting business.

The government alleges that the mixer facilitated money laundering for criminals, raising questions about developer accountability.

Conversely, many in the crypto community argue that software developers should not be judged on the use of their platforms by third parties.

This situation highlights a critical legal crossroads for the cryptocurrency sector, especially regarding the responsibilities of developers and investors alike.