EU is set to delagalise decentralised mixers

[pawel7777]

Without me doing something illegal, the US gov cannot and will not do any of what you listed. (...)

Wrong. You could get your assets seized even if you're only suspected of committing a crime, or even if you're only associated with someone who is via Civil Assets Forfeiture.
https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United_States
It happened to one member of this forum, BurtW, years ago. You can read his story here, but you can find plenty of other examples of people losing their property despite not being convicted.

Also, what's viewed as legal or illegal can be changed on a whim. Best example is Canadian government freezing bank accounts of participants or supporters of Truckers' protests during covid.

But yeah, if you truly believe that all the politicians taking money from lobbying groups and acting like sociopaths just to get more votes are doing all that with your (not theirs) best interest in mind and their primary goal is not power and money but to serve you well - then I guess you have nothing to worry about.

[d5000]

So essentially the developer of Tornado Cash is prosecuted for writing and making public the source code of a program.

No. It's because he provided a service and took fees from it, i.e. ran a company. I've read a pretty good Coindesk article about the matter.

The cases Samourai and Tornado Cash are quite similar. They are about software projects, but in both cases, a group ran a for-profit centralized service with an instance of that software, taking fees from customers. Tornado Cash had even a token to generate additional profit, i.e. something which could be seen as an unregistered security.

Of course there could have been other people simply forking the software, as they were open source, but that does not prevent the founders to dominate, e.g. running a website with the service's name as its domain. But this is not even needed. Maybe "forkers" of these projects which also ran a profitable business could also be prosecuted on the same premises.

In general I think these cases lead to many questions regarding the current "DeFi" landscape. Most of so-called DeFi projects are non-custodial but have often a similar dominant centralized instance which raises fees. Metamask/Consensys is another example - they take fees from their Swaps feature, even if the wallet is non-custodial.

It's not that I endorse this legal action, I can not emphasize that enough. For me, the "red line" should be between custodial and non-custodial services, and even for custodial ones there should be exemptions based on volume (like in Argentina for example, although the limit is very low with about $30000 USD yearly revenue). Because even Lightning nodes in the US could become endangered if they take fees because they could also be seen as a "business".


However as I've written elsewhere in the case of Samourai at least it's possible that the accusation is simply wrong. The crucial question for me (which I don't know because I've not seen the code nor a sufficient detailed explanation for how Whirlpool worked - if someone knows I'm grateful for an explanation or link!) is if the Whirlpool server signed a CoinJoin transaction (i.e. acted as a market maker with own funds) or only collected transactions from others. If the latter is true then it should not be classified as a money transmitter, the charges would then be probably futile.

[btcinfo891]

So essentially the developer of Tornado Cash is prosecuted for writing and making public the source code of a program.

No. It's because he provided a service and took fees from it, i.e. ran a company. I've read a pretty good Coindesk article about the matter.

Thanks for the article, I read it with interest, even though it is mostly about Samourai. I am not sure whether the profit that the respective software authors make is what makes or breaks the legality of the service in the eyes of the government.

I found the press release of the US government regarding Tornado Cash

They say

Tornado Cash Founders Charged With Money Laundering And Sanctions Violations
...
Indictment charging ROMAN STORM and ROMAN SEMENOV with conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money transmitting business.  The charges in the Indictment arise from the defendants’ alleged creation, operation, and promotion of Tornado Cash, a cryptocurrency mixer that facilitated more than $1 billion in money laundering transactions and laundered hundreds of millions of dollars for the Lazarus Group, the sanctioned North Korean cybercrime organization.

The profit of their business is responsible for the last charge, "conspiracy to operate an unlicensed money transmitting business". However the first two charges, "conspiracy to commit money laundering, conspiracy to commit sanctions violations" are not directly related to any profit, so even a non-commercial software or service can be prosecuted for the first two "conspiracies".

I am pretty sure that their profit made them more important in the eyes of the US government, thus making them a priority target. But the question is what are they going to do after they kill all for-profit privacy tools? I think that they will go after the tools which don't provide any visible profit for their authors. At least that is what the wording of the press release suggests.

[d5000]

I found the press release of the US government regarding Tornado Cash

Thank you for linking. You're indeed right that they separate the "money transmitting business" accusation from the "money laundering" and "sanctions violations" acusations. However, still the accusation is about a "service" they were "operating". They mention infrastructure and profits several times. Also they mention some internal communications which in their eyes prove that they knew about the illicit usage and facilitated it, for example with the function which was marketed as sanction-compliant but was openly admitted to be ineffective. This is also similar to the Samourai case. However, as it seems, the evidence is quite thin, if there are no more details about these internal communications.

There is an interesting article here about the Dutch case which goes a bit into detail.

There is of course the "knife seller" problem: can you prohibit something only because it can be used by criminals? The FIOD itself has recently stated that operating a mixer and also using it is not per se illegal. So if there is no evidence of actual cooperation between the mixer operators and criminal groups there is imo no "just" base for a conviction. For this reason, if what I've read of this case is not hiding something, I personally think that a conviction of "money laundering" would be a complete abuse. And in the case of the "money transmitter", there may be some evidence that Tornado Cash was a business, but there is also the question of the businesses' location. If it wasn't done in a place where such a business is prohibited, and for example didn't directly target American or Dutch people, then also there is authority abuse from my point of view.

[CODE200]

Damn, this will probably not be as effective as they like to think it, this ban on mixers only serves to hurt those that aren't within the biggest money laundering syndicate in the business and also those that just want the peace and privacy of doing transactions. I'm sure that a lot of corrupt EU politicians are probably not too worried about this because they're just letting this legislation pass so they can hurt the other money laundering schemes out there. I hope that they see the future that this move will create, there's just more resistance from the people and then they will create an even more obnoxious way to imitate mixers that would pass as legal or real private under EU's eyes.

[pawel7777]

(...) You're indeed right that they separate the "money transmitting business" accusation from the "money laundering" and "sanctions violations" acusations. However, still the accusation is about a "service" they were "operating". (...)

I think there could be a lot of judgment involved in what constitutes "operating a business" or "providing a service" etc, but I think that developers that only develop the code, release it to the public for anyone to use and end on that, should be on the safe side.
But it's still possible some jurisdictions could decide to drag them through courts, causing them a lot of stress and making them pay all the legal fees, just to set an example.

The moral of the story - any dev work relating to privacy and coin-mixing better be done anonymously.

[bbc.reporter]

From what I've read about the Alexey Pertsev case I have zero sympathy for him. He and others like him is precisely why many of the regulations are being created.

We can have our arguments on why we should not like him, however, this is not important. What is important is the decision of the 3 judges next week because it might become a precedent for others to follow.

Also, what are you implying on others like him? How is Tornado Cash different as another tool to help people in the cryptospace preserve privacy?

Usually cryptomixer developers are very rarely caught by special services. According to the experience of past mixers, special services seize servers and then the news ends.
Alexey Pertsev made a very big mistake when he became a public person. He did not realize the consequences of his actions.
I am also waiting for the court decision, but I think that the court will not be on Alexey Pertsev's side.

Also agreed! This was why I was arguing that the developers who create tools for anonymity and privacy in the future will never be public on their identities. It will be very much similar before 2017 in bitcointalk where developers of new altcoins and many projects will be known only by their usernames. I reckon they might also be pushed to a place in the internet where they will be hard to find. The darknet.

[zasad@]

From what I've read about the Alexey Pertsev case I have zero sympathy for him. He and others like him is precisely why many of the regulations are being created.

We can have our arguments on why we should not like him, however, this is not important. What is important is the decision of the 3 judges next week because it might become a precedent for others to follow.

Also, what are you implying on others like him? How is Tornado Cash different as another tool to help people in the cryptospace preserve privacy?

Usually cryptomixer developers are very rarely caught by special services. According to the experience of past mixers, special services seize servers and then the news ends.
Alexey Pertsev made a very big mistake when he became a public person. He did not realize the consequences of his actions.
I am also waiting for the court decision, but I think that the court will not be on Alexey Pertsev's side.

Also agreed! This was why I was arguing that the developers who create tools for anonymity and privacy in the future will never be public on their identities. It will be very much similar before 2017 in bitcointalk where developers of new altcoins and many projects will be known only by their usernames. I reckon they might also be pushed to a place in the internet where they will be hard to find. The darknet.

The darknet is a network for people who want to communicate in a certain atmosphere.
If you need to exchange dirty bitcoins for white ones, then there are a lot of resources on the Russian Internet on the clearnet, and the main players have deposits of up to 100 thousand dollars on various similar forums. You give 1 dirty bitcoin and the operator transfers 0.92-0.94 bitcoins from the exchange account to you, or they will send a courier to you with money.
I don’t need such services, but I want to tell you that in the Russian segment this is a very competitive market with major players.

[pawel7777]

(...)
The darknet is a network for people who want to communicate in a certain atmosphere.
If you need to exchange dirty bitcoins for white ones, then there are a lot of resources on the Russian Internet on the clearnet, and the main players have deposits of up to 100 thousand dollars on various similar forums. You give 1 dirty bitcoin and the operator transfers 0.92-0.94 bitcoins from the exchange account to you, or they will send a courier to you with money.
I don’t need such services, but I want to tell you that in the Russian segment this is a very competitive market with major players.

Thanks for the info. It's always good to know that there are some other options available. But what about the rumours about the recent "Russia crypto ban"? If I understand correctly, there's a proposed bill that will prohibit any exchange of cryptocurrencies with some exceptions for miners, who would have to report their activities to authorities.
I reckon that, if that's true at all, the option to "wash" dirty bitcoins through Russia could no longer be possible or at least heavily impaired.