Why Tornado Cash Matters? 🌪️
Developer Alexey Pertsev found guilty of money laundering by Dutch court. Regulations raise questions over Bitcoin's privacy and crypto mixers. Wisconsin Pension Fund invests $164M in Bitcoin ETFs.
Hello, y'all. Guess who's gonna get locked up this time? Looks like, all of them.
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Forget CZ's prison stint or SBF's downfall.
Here’s one that holds the key to crypto's future: The verdict of Alexey Pertsev, the brains behind Tornado Cash
A Dutch court found Pertsev guilty of laundering $1.2 billion through Tornado Cash and sentenced him to over five years in prison.
What's the deal?
Tornado Cash mixes crypto, making it harder to track where the money goes. This is great for privacy, but also attractive to criminals.
US blacklisted Tornado Cash last year.
Hackers like the Lazarus Group (famous for the $625 million Axie Infinity heist) are accused of using it.
Pertsev allegedly knew some users were laundering money, but the court says he didn't do enough to stop them.
Big deal for crypto developers.
Could writing code land you in jail if criminals use it?
Pertsev is accused of turning a blind eye to potential money laundering on his mixing platform.
While prosecutors argue he should have known better, there's no evidence of him actively facilitating crime.
This sets a precedent for how developers are treated under the law, especially those creating tools that could be misused.
DeFi experts see the US stance against Tornado Cash as an attack on cryptocurrency privacy itself.
Pertsev told the court during his two-day trial in March.
“I never had the desire to help or tolerate criminals in any way, I have a different mindset … I hope you understand that.”
Timeline of the Tornado case
Bad omen for Roman Storm's upcoming US trial?
Roman Storm, Tornado Cash co-founder, faces trial in September for alleged money laundering and sanctions violations.
Why the Difference? US law sets a higher bar for criminal charges. Here's why:
Intent: US law requires a specific intent to commit a crime, unlike the Dutch case.
Negligence: Dutch law seems to have a lower threshold for negligence, potentially impacting developers.
Storm's lawyers are throwing the First Amendment at the charges, arguing writing code is basically free speech. They're not alone - crypto groups are backing them up, saying the whole case is riddled with errors. Now, the judge gets to decide: toss it or let it go to trial.
People are disappointed
Bitcoin Mixers Flee US
Several Bitcoin mixing operations are shutting down or blocking American users.
The Tornado Cash case follows the arrest of Samourai Wallet founders on money laundering charges, and therefore Wasabi Wallet and Phoenix Wallet stopped service for US users.
Hardware wallet Trezor also announced it's discontinuing its mixing service globally.
Crypto Mixer Ban in the US?
House Democrats propose a bill to target crypto mixing services, seen as money laundering tools, especially for Tether (USDT).
The bill, supported by Representatives Brad Sherman, Emanuel Cleaver, and Bill Foster, aims to clamp down on these platforms by treating them as potential channels for money laundering, unless audits prove otherwise.
Block That Quote 🎙️
Max Hillebrand, CEO of zkSNACKs.
“Bitcoin privacy will survive, but cutting back the support from zkSNACKs for Bitcoin developers and privacy educators is a regrettable setback.”
zkSNACKs (Wasabi wallet developers) shutting down its CoinJoin service due to US regulations, wasn’t a pleasant move.
What's CoinJoin? Imagine a money changer that mixes everyone's coins together before giving them back. CoinJoin does the same for Bitcoin transactions, making it harder to track who sent what to whom.
zkSNACKs CEO isn't sure if other countries will follow the US's lead on privacy restrictions.
He assured that Wasabi wallet will still work for sending and receiving Bitcoin, but it won't have CoinJoin's advanced privacy features.
Ripe Regulation. Future Bleak.
Bitcoin's future is looking bleak, according to core developer Matt Corallo.
Why? Bitcoin was supposed to be a private, scalable, and trustless way to pay. Corallo says that vision hasn't materialised.
“Sadly, all the ideas for making Bitcoin (or any crypto) actually useful for transacting trend towards having some untrusted party in the flow of funds … We just haven’t cracked building crypto payment rails without an (untrusted!) party being involved.”
Scaling Solutions = Trust Issues: Existing scaling solutions like Lightning Network and sidechains rely on trusted third parties, which goes against Bitcoin's core principles.
With no true trustless scaling solutions, Corallo predicts regulators will swoop in and control crypto.
“With where Bitcoin is today, it's hard not to see a bleak vision of the future … If Bitcoiners want to preserve what we’ve built and fight for it, the focus needs to be on drastic improvements to default wallet privacy across the ecosystem, aggressive investment in regulatory change, and operation of scalability solutions across the world.”
In the Numbers 🔢
$164 Million
Wisconsin Pension Fund investment in Bitcoin ETFs.
SWIB filed a report with the SEC showing ownership of millions of shares in.
BlackRock's iShares Bitcoin Trust (IBIT) - worth around $100 million
Grayscale Bitcoin Trust (GBTC) - valued at roughly $64 million
First time a major state pension fund has invested in Bitcoin ETFs.
Boston based hedge fund Bracebridge Capital reveals a $363 million investment in various Bitcoin ETFs too.
Nothing new: Major banks, Wells Fargo and JPMorgan Chase SEC filings revealed holdings of less than $1 million combined in spot Bitcoin ETFs. Susquehanna International Group bought over $1 billion worth of spot crypto ETFs in Q1.
US Blocks. US Seizes.
A developer at Solana-based DEX Cypher admitted to stealing $300,000 in funds meant to reimburse victims of a hack.
Who? Anonymous contributor "hoak"
Hoak stole funds from Cypher's redemption contract, meant to reimburse users after a $1 million exploit last year.
Hoak's Statement
Admitted to gambling away the stolen funds.
Blamed a "crippling gambling addiction."
Denied involvement in the original hack.
Expressed intent to seek treatment and cooperate with authorities.
Cypher's Struggles: Hacked in August 2023, leading to a freeze on the exchange.
Another developer, "Barrett," initially raised the alarm after noticing suspicious withdrawals from hoak's wallet.
The Surfer 🏄
Polymarket scored $70 million in funding. This follows two funding rounds, with Peter Thiel's Founders Fund leading the bigger one. Ethereum's Vitalik Buterin also participated. The company is exploring US-compliant options for future offerings. This follows Buterin's recent investments in other blockchain projects.
Tether froze $5.2 million in USDT tied to phishing scams. This adds to over $1 billion frozen by Tether since its launch to combat illegal activities like hacks and terrorism financing.
Paxos welcomes "CryptoDad" Chris Giancarlo, former CFTC Chair, to its board. Giancarlo, who oversaw the launch of the first Bitcoin futures, will advise Paxos on growth and innovation in the regulated digital asset space. Paxos is known for its stablecoins like Pax Dollar (USDP) and Pax Gold, and is regulated by New York's Department of Financial Services.
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