The U.S. Department of Justice (DOJ) has formally stated that venture firm Dragonfly Capital and its executives are not targets in its investigation into crypto mixer Tornado Cash, reversing earlier indications of potential charges. Dragonfly co-founder Haseeb Qureshi announced the development after prosecutors clarified their position during Monday's court proceedings in the criminal trial of Tornado Cash co-founder Roman Storm.
This reversal follows Friday's court session where prosecutors had suggested Dragonfly personnel might face charges for the firm's August 2020 investment in Tornado Cash developer PepperSec Inc. Qureshi called the initial threat "unprecedented" and a violation of DOJ policy, asserting it was designed to prevent Dragonfly's Tom Schmidt from testifying for Storm's defense. Schmidt subsequently invoked Fifth Amendment protections against self-incrimination.
Dragonfly maintained its $150,000 investment was based on legal counsel confirming Tornado Cash's compliance and belief in "open-source privacy-preserving technology." The trial of Storm—who faces 45 years for conspiracy and sanctions violations—has seen $1.9 billion flow through Tornado Cash in H1 2024 despite 2022 U.S. sanctions (later overturned in civil court). Storm has raised $4 million for his defense but requires another $1.5 million as proceedings enter week three.
The case, expected to set precedent for open-source developer liability, follows guilty pleas from Bitcoin mixer Samourai Wallet founders. A Chainalysis witness also invoked the Fifth Amendment after prosecutor contact, highlighting the probe's contentious nature.