Arbitrum DAO has dropped the proposal to donate up to $1.28 million to Tornado Cash’s developers Roman Storm and Alexey Pertsev due to potential legal challenges, a source familiar with the matter reported.
Last week, the Arbitrum community reportedly voted on a proposal to fund 200,000 to 600,000 ARB tokens, worth around $400,000 to $1.2 million at the time of the proposal, to support Storm and Pertsev’s legal defense through WeWantJusticeDAO. However, the proposal was withdrawn.
More Regulations in The Market
Although Arbitrum DAO removed the proposal, Tornado Cash’s supporters are exploring different methods to finance the developer team, including funding through Coin Center, a non-profit organization focusing on crypto policy issues. In addition, The Block reported that DAO will make a new proposal this week.
Roman Storm and Roman Semenove are the two founders of Tornado Cash, a controversial crypto mixing tool associated to several cyberattacks and hackers, with the most reputable one being Lazarus Group, a notorious global hacker group allegedly linking to North Korea and being behind many major cyber security attacks around the world.
In August last year, the US Treasury charged Storm and Semenove of money laundering and sanction violation. The US FBI successfully arrested Storm shortly after the news.
Tornado Cash’s programmer Alexey Pertsev was arrested by the Netherlands police in 2022. He was released on bail in April last year and is currently waiting for his trial.
Since their arrest, Tornado Cash’s developers have received an enthusiastic defense from DeFi advocates. Since its launch in late January, the legal defense fund has received a grant of 386.01 ETH, worth around $1.5 million. Ethereum founder Vitalik Buterin reportedly donated 12 ETH.
Whether the Arbitrum DAO would deal with legal issues with their donation to Storm and Pertsev remains a big question. Last month, GoFundMe, a major fundraising platform, rejected a crowdfunding request for Storm’s legal support, citing a clause where the funding could be legally damaging.
Privacy-Focused Projects Under Pressure
Privacy-focused crypto projects have long been an important part of a world where individuals seek to protect their privacy. Apart from prominent names like Tornado Cash, Monero, or ZCash, other new projects also join the niche alongside the rise of crypto. However, the ongoing crackdown on these projects shows a catch.
Protecting user anonymity is the ultimate goal of the privacy-niche crypto protocols. Unfortunately, this aspect not only benefits regular users but also malicious actors. Tornado Cash has become a go-to place for hackers to launder money. Similarly, Monero is also used as a tool for ransomware gangs.
The US Department of Justice claimed that Tornado Cash was not based on a good motive as the project often described, instead essentially driven by money.
Tornado Cash’s website has been blocked by the US government. Initially, the act didn’t affect the protocol’s operation since it is a decentralized protocol running on the Ethereum blockchain. The mixer is still the one of the popular choices for people to protect their transaction privacy.
To avoid legal trouble with the US, many blockchain and DeFi projects originating in the US such as Alchemy, Infura, Uniswap, and Balancer, among others, are forced to block users from interacting with Tornado Cash.
Not only crypto mixing services, but privacy coins are also under pressure as the global authorities extend their crackdown. Launched in 2014, Monero is a famous sample of cryptocurrencies that promote anonymity in the market.
Due to increasing legal pressure, many crypto exchanges, like OKX and Binance, have had to stop supporting anonymous coins.
Besides, the intense regulatory scrutiny also forces major crypto exchanges to avoid listing privacy coins, especially when the global authorities increasingly prioritize higher standards of KYC and money laundering compliance.
