A warning from one of crypto’s most-watched developers has reignited debate over the legal risk of building decentralized software in the U.S. Roman Storm, co-founder of the Tornado Cash privacy protocol, cautioned that open-source builders should not assume they are safe from Department of Justice scrutiny. He argued the line between “non-custodial” and “money services” is being tested in court—and could shift with enforcement. The remarks, first highlighted by Cryptopolitan on Oct. 19, 2025, arrive as his own case in New York continues to shape how prosecutors view decentralized finance. For many founders, the prospect of DOJ prosecution of DeFi developers is no longer abstract—it is personal.
Why Storm’s warning is resonating across DeFi
Storm posed a blunt question to builders: “How can you be certain that the DOJ will not charge you as a money service business for building a non-custodial protocol?” He suggested that, under regulatory scrutiny, any decentralized, non-custodial service might be reframed as custodial. That ambiguity, he said, creates the risk of retroactive prosecution for teams who believed they were compliant when they launched.
Storm referenced his Sept. 30 motion for acquittal, describing Tornado Cash as autonomous code that no single entity can control or alter. According to his filings, the protocol operates without a central operator, which he argues should place it outside the scope of money transmission rules that apply to custodial intermediaries.
The concerns are amplified by the recent partial verdict in his case. In August, a jury in the U.S. District Court for the Southern District of New York found Storm guilty on one count: conspiring to operate an unlicensed money transmission business, according to courtroom reporting by Inner City Press. The jury did not reach a unanimous decision on separate allegations related to money laundering and sanctions, resulting in a deadlock on those counts. Storm has not yet been sentenced.
Inside the Tornado Cash legal case
Tornado Cash, a privacy-focused software protocol on Ethereum, lets users mix transactions to help break on-chain linkages between wallets. Supporters argue it provides financial privacy for law-abiding users. Regulators and law enforcement have raised concerns about use by sanctioned actors and illicit finance.
The August verdict landed at a pivotal moment. Even a single felony conviction, particularly for unlicensed money transmission, can set a reference point for future enforcement. While the case is highly specific to Tornado Cash’s architecture and governance, developers across the industry have been watching to understand where prosecutors draw the line when decentralized software interacts with real-world compliance obligations.
Key elements cited around the case include:
- The government’s theory that certain developer activity and governance structures can amount to operating a money transmission business without a license.
- The defense argument that Tornado Cash is decentralized software, not a service run by a person or company, and that no single actor can modify or control the protocol.
- A hung jury on laundering and sanctions allegations, leaving those questions unresolved in the August proceeding.
Timeline:
- August: A jury in SDNY finds Storm guilty on one count tied to unlicensed money transmission; no agreement on other charges.
- Sept. 30: Storm files a motion for acquittal, reiterating that Tornado Cash is decentralized and beyond the control of any single entity.
- Oct. 19: In comments cited by Cryptopolitan, Storm warns that developers of non-custodial tools could still face charges, depending on how authorities interpret their role.
Community reactions, policy signals and what comes next
The verdict sent ripples through the open-source community, where contributors worry that writing code could be conflated with running a regulated financial service. That fear intensified after Storm asked how developers can be sure they will not be treated as money services businesses, even if they do not hold customer funds.
There are signs the policy conversation is evolving. Jake Chervinsky, chief legal officer at Variant Fund, noted in an X post that the Trump administration has stated an ambition to position the U.S. as the global crypto hub. In that context, he argued it would be inappropriate to retry hung counts from Storm’s case.
In parallel, Matthew Galeotti, serving as acting assistant attorney general for the DOJ’s criminal division, signaled a more measured approach in remarks summarized in an August report. He said the department would not pursue a retrial of Storm on the deadlocked counts and would not move forward with other similar cases. Speaking at the American Innovation Project Summit, Galeotti added that merely writing code without bad intent is not a crime. “We should not leave innovators uncertain about what could result in criminal charges,” he said, adding that indictments should not be used to make new law.
Legal defense funding from Ethereum Foundation and Keyring
Amid the legal uncertainty, the Ethereum Foundation partnered with Keyring Network to support the defense of Tornado Cash developers Roman Storm and Alexey Pertsev. Under the initiative, all proceeds from Keyring’s zkVerified vaults—a yield product on Ethereum mainnet—will be directed to the legal fund for two months. The landing page for the fund frames the effort as a community-backed stand for privacy-preserving research and development: “This is a joint effort with the Ethereum Foundation’s Funding Coordination Team to protect developers who build privacy-preserving technology.”
The funding drive underscores how high-profile the Tornado Cash legal case has become, both as a test of legal theory and as a symbol in the broader fight over open-source autonomy.
What DOJ prosecution of DeFi developers could look like
Storm’s warning hinges on definitions. The question is whether developer actions—such as deploying contracts, maintaining front ends, or participating in governance—could be construed as operating a money transmission business. Prosecutors may look at:
- Control: Do any parties maintain meaningful control over funds or key protocol parameters?
- Intermediation: Is there a business model that intermediates transactions or sets terms of service?
- Compliance posture: Are there steps taken that resemble know-your-customer obligations or are such steps absent in contexts where regulators expect them?
Defense arguments often stress that non-custodial code does not enable its authors to access or move user funds, and that protocol governance is not the same as operating a financial service. How courts resolve these issues will shape the contours for future projects.
Implications for open-source builders
For developers, the practical takeaway is to treat compliance questions as design questions from day one. Project teams are reassessing documentation, governance, and communication to ensure they do not inadvertently suggest custodial control. Trade-offs are real: the more a team intervenes to improve user safety or UX, the more it risks being viewed as an operator rather than a contributor to autonomous code.
This moment also spotlights the role of independent legal defense funds, industry coordination, and clearer guidance from policymakers. Open-source maintainers want assurances that contributing code—without custody over assets and without intent to facilitate crime—will not be treated the same as running a financial intermediary.
While Storm’s conviction on the unlicensed money transmission count stands for now, the hung jury on other allegations and Galeotti’s statements suggest the policy landscape is not settled. Continued filings in the Tornado Cash legal case, potential appeals, and any formal DOJ guidance will be closely watched. As Storm noted, the gap between how developers define “non-custodial” and how enforcers interpret it remains the heart of the matter.
Conclusion
Roman Storm’s caution lands at a turning point for crypto policy in the U.S. His experience shows how legal theories can collide with decentralized design—and how outcomes in one courtroom can ripple through an entire sector. With defense funding from the Ethereum Foundation and Keyring, vocal calls from legal experts, and signals from DOJ leadership, the immediate risk calculus for builders is shifting. Whether this results in clearer rules or continued case-by-case litigation will determine how real the threat of DOJ prosecution of DeFi developers proves to be in practice.
Article Credit: mitrade.com
