Is Coding a Crime? Roman Storm Tornado Cash Verdict | Peter Van Valkenburgh & David Morris

TRANSCRIPT

David Hoffman:
[0:03] All right bankless nation we are live with peter van valkenberg from coin center and david morris from the rage peter you've been on the show before david you're brand new david you have been reporting doing some of the most in-depth reporting in the front lines in the courtroom uh with the roman storm case uh we are i think this took four plus weeks for all of this to wrap up and we just got the verdict um just a few hours ago about

David Morris:
[0:28] Three and a half.

David Hoffman:
[0:29] Weeks three and a half weeks yeah just as a um naive non-legal legal-minded person my summary of the verdict so far is mixed with definitely cause for concern i think if we are primarily concerned with roman storm the individual uh we are happy he is flying home to seattle tomorrow to spend time with his daughter uh and but the story is not over as uh as an industry a crypto industry There

David Hoffman:
[0:55] are things to be concerned about and the fight continues. That's kind of my summation of everything. Maybe you can give me your immediate thoughts and reflections since you were just there and you watch things go down firsthand.

David Morris:
[1:06] Yeah, I think that the verdict reflects sort of a really thorough chaos at every level of this proceeding from start to finish. Um, there were really constant fights and constant uncertainty about which, um, witnesses would be admitted, um, what they would be allowed to talk about within some very fine grain lines. Um, just to pick one example off the top of my head, um, there was considerable discussion and debate over whether, um, evidence could be allowed that, um, um, uh.

David Morris:
[1:44] Crypto holders were threatened with kidnap or physical danger because of the public nature of blockchain addresses. And in fact, one witness for the defense was sort of talking about hiding his investment portfolio online and not wanting to have a quote unquote target on his back. And then there was a big objection. And that was taken as like some metaphor for physical threat. This is just one example of like things were being fought on a moment to moment basis with incredible precision about the nature of the language being used around every charge. And at the same time, the government had some real problems with the evidence that it did get in, particularly reliable tracing of whether certain transactions ever actually connected to tornado cash. One of the jury questions that came back very late in the process was having to do with whether intermediary wallets that connected a big hack to the sanctioned North Korean hackers and in turn to Tornado Cash, the question came up from the jury, are these intermediary wallets also sanctioned? And this is just one example of very fine details that sometimes were glossed over by the prosecution.

David Morris:
[3:05] And I think the sort of confusion of the verdict, which on two counts was no verdict at all, not guilty, not guilty, but no consensus could be reached. I think that that really does reflect both the ambiguity of a lot of what they were being tasked with interpreting and just the general complexity and difficulty of the case, as well as I think some probably some skepticism on the substance from the jury for sure.

David Hoffman:
[3:37] So maybe just to provide maybe a map for listeners to really understand and navigate this question, there are three counts that we need to pay attention to. And each one of these things is a conversation in and of itself. And on each one of these things, there's just confusion generally. So maybe I'll turn to Peter. Peter, can you talk about the three counts that Roman was up against and what happened on the outcome of each individual one? And we'll just keep it high level at first and we'll kind of dive into them as we go on.

Peter Van Valkenburgh:
[4:07] So, simply stated, all three counts are conspiracy charges. I want to say that off the bat, which means you don't have to prove that they did the target offense. You have to prove that they agreed with others. So, it'd be Roman, it might be Alexei Pertsov, the developer that's charged in the Netherlands. It might be other co-conspirators unnamed as well. You need to prove that Roman agreed with these other co-conspirators to do the offense and took one tangible step towards that offense and then what are the three offenses the first one is money laundry so that's knowingly and with intent hiding the proceeds of some illicit activity some crime so you're making it hard for law enforcement to investigate the trail of money in a crime the second is unlicensed money transmission which and i'll probably talk the most about this one, and this is also the one where he was found guilty, the only charge that stuck for the jury, where this one is you were transmitting money and you didn't have a license and in the specific subcharge of unlicensed money transmission it was transmitting money without a license and knowing that the money you're transmitting is the proceeds of crime is a is a is an illicit transaction and then the third charge was evasion of sanctions

Peter Van Valkenburgh:
[5:36] And so what's specifically alleged in in that charge is well we know that north korea used tornado cash. North Korea, the Lazarus Group, the hacker group, after they hacked the Ronin Bridge, used tornado cash to hide their hack. North Korea and the Lazarus Group are a sanctioned entity. So you conspired to evade US sanctions along with others, which ostensibly could even extend to North Koreans. And so it's conspiracy in all those cases. And the case is incredibly weak in a lot of regards. First and foremost among them, just with respect to conspiracy, there isn't evidence that Roman got on the phone with somebody else in the world and said, ah, I know you've got some illicit funds. You've got some proceeds of crime. I'll help you hide them. That's a simplistic view of money laundering. That's what a jury expects with money laundering. Nothing to that effect in this case. You know, there's a lot of allegations of, you know, he produced this software. He knew that people would be using this software in a certain way, and therefore he should be culpable. But that's a very different legal standard than proving agreement and a tangible step towards committing the crime.

Peter Van Valkenburgh:
[6:51] We can talk more about why the unlicensed money transmission charge is particularly upsetting to me. And that is the one charge where he's found guilty. The first and the third charge, the money laundry charge and the sanctions evasion charge, we got a hung jury. And that means that, you know, under the Sixth Amendment of our Constitution, under New York law, you need unanimous juries in order to find that someone is guilty of a crime and actually also to find whether someone's not guilty. And if you can't force the jury to agree, if they can never come together, then you get a hung jury or a mistrial for that count.

Peter Van Valkenburgh:
[7:25] And David, you were there all day and no better than I. And thank you so much for your reporting, by the way, David. You and the Rage have done Yeaman's work in helping people like me in Washington, D.C. Stay informed about the case. But the judge even gave the jury an instruction saying, I need you guys to reach an agreement. And the defense pushed back on that, said they shouldn't be forced to reach an agreement. And then ultimately the judge gave the instruction, but the jury still wouldn't agree on those first and third charges, which I think just speaks to, as David said, the confusing case presented by the government and the very weak legal ground that they were on as far as like showing that he was actually culpable of these crimes.

Ryan Sean Adams:
[8:00] So just to recap those three counts, right? So the first count was Hungary, not unanimous. The third count was, I thought it was not guilty,

David Hoffman:
[8:12] But it wasn't the same. The same. No, it was the same. Yeah, it was misreported. What I'm sharing on the screen was misreported. So the first and third were ununanimous. Hung jury.

Ryan Sean Adams:
[8:22] And basically that means you don't have agreement. You need a complete agreement for those two counts.

Peter Van Valkenburgh:
[8:26] And you're not guilty. The ramification does mean that the government can regroup and choose to re-prosecute, which would be better.

Ryan Sean Adams:
[8:33] But that would be their choice. The DOJ would have to continue to be as aggressive

Ryan Sean Adams:
[8:37] as the DOJ has been with respect to this case and continue to pursue that. Now, the second count was guilty. And as I understand it, at high level, let's talk about like for Roman, right? There was the max charge was like 45 years of jail time for across all three of these counts. Yes and so the but um since the first and the second and the third were hung jury the the second where he was convicted as guilty by this jury actually is five years in prison is yeah is that maximum of course okay all right so he he um some scarier ones i guess for roman were avoided in this case, which is, I guess, part of the, I don't know if this is a silver lining here,

Ryan Sean Adams:
[9:27] or like how we're actually viewing the outcome. But I don't know, what I'd like to do maybe first is here, David, when the judge was going through this in the courtroom, because you were there, like, what was the atmosphere? What was kind of going on? What did Roman look like? What did the prosecution look like? I saw a quote like the judge has to instruct the jury and all members in court to like show no emotion. So I don't know if that held.

David Morris:
[9:54] Well, first of all, I would I would add one other item to your inventory of like silver linings or whatever you want to call them, which is that the prosecution did after the verdict was was sent in. Make a motion to remand Roman to jail while he awaited sentencing on the one conviction charge. They made the argument that he was a flight risk because of his international connections and access to capital and resources. The defense made the counter argument that they were planning to appeal this. And ultimately, the judge did not choose to remand him to custody. He's going to be out on bail. It's secured against his house in Seattle.

David Morris:
[10:36] And what was very interesting about that moment was, and this is the big silver lining, I think of this for everybody, not just Roman, is the judge said just in open court while we were there observing that there were many roads to appeal on this particular conviction count. I'm sorry, my cat is being insane here.

David Morris:
[10:57] But Judge Filet said that there are many options for appeal, essentially, she just acknowledged it directly. And that was, in fact, part of the logic of her choice not to remand Roman to

David Morris:
[11:17] custody while awaiting sentencing. She basically gave a certain amount of a vote of confidence to the appeal that is likely to be filed even on this count. But as to the bigger question of atmosphere, I think that I would define for the most part the atmosphere as very professional, um, on all sides. And Roman was extremely stoic for most of the trial. Um, and I, I think that, um, it probably was to his, his advantage. He didn't show a lot of like, you know, stress behaviors or anything like that. Um, you know, my, my main point of reference for a lot of these things is, um, the Sam Bankman freed trial and, and Sam sort of notoriously was like twitching and playing on his laptop for the entire thing. Um, and, uh, And Roman was not even doing, not, not, not doing anything really just like closely observing. Um, I will say that, um, it was pretty interesting, uh, in the last couple of days, um, um.

David Morris:
[12:13] I think maybe it was Monday. There was a long period of you just wait in the empty courtroom for the jury while they deliberate. And for the journalists, you're kind of sitting there waiting for that verdict to come back so that you can then go and report it and have your after action report and let people know. But the counsel and Roman himself were also sitting there for a lot of the time while we're waiting on this verdict. So you sit there And you see this guy waiting to see what's going to happen with his life. And he was very stoic through much of that. But then starting on Monday, he actually sort of was mingling with, you know, there were there were supporters there in the gallery observing the trial. And he's sort of very briefly and to a certain extent, I'm not sure whether this is like entirely kosher or appropriate, but, you know, he seemed, in fact, somewhat relaxed. He seemed to be really optimistic as the jury debated. And there was reason for this, because one of the sort of rules of thumb of criminal trials is that, you know, in a guilty verdict, the jury generally comes back very quickly. If they've made up their minds and they, especially if they've decided guilty, they tend to come back quickly.

David Morris:
[13:28] The SafeMoon trial, which happened recently, I think the jury took four hours to reach a conclusion. I think in SBF, it might have been as little as like three hours. Um, and so then by the time we were coming to, um, Monday and the jury by then had already been in deliberation for almost 10 hours, um, and was in its second day and even began like, you know, by Tuesday we had a hat. No, by the end of the day, Monday, the jury was trying to figure out its schedule for the entire week, which was really striking. We had one juror, juror number, um, five, I believe who had a heart out at the end of this week. So she would have had to leave, which would have meant actually adding in an alternate juror who hadn't been present for deliberation and restarting the entire deliberation process.

David Hoffman:
[14:18] Oh, my God.

David Morris:
[14:20] So that was one factor. On Tuesday, a juror had a grandmother whose 90th birthday was happening.

Ryan Sean Adams:
[14:28] And a pedicure appointment.

David Morris:
[14:29] And a pedicure. And unfortunately, the pedicure had to go. And so on Tuesday morning, they were there for half a day. And, you know, we were kind of digging in and I was starting to, frankly, feel a little bit of despair at my fate, but it did come in a little bit sooner. And yeah, so I guess my summation would be that it was actually like, I think that Roman was feeling optimistic towards the end. And it turns out somewhat rightly so, certainly for his own, you know, sake.

David Hoffman:
[15:04] In addition to everything you said, you just said, we have this tweet from Eleanor, Tara, who tweeted out that she saw Roman Storm coming out of the classroom and excuse me, courtroom, courtroom.

David Morris:
[15:17] It feels like a classroom a lot of the time.

David Hoffman:
[15:21] She said in a quiet voice, but with a noticeable smile, Roman said it's a big win. The 1960 charge, which we'll get into, is bullshit and we're going to fight it all the way. Uh and so i think in like i was actually able to meet roman uh just for a dinner this last weekend and he feels very convicted in that he has a 99 chance this was before the out the verdict was ever read that he had a 99 chance of a mistrial because of shenanigans that were going on in the courtroom between the prosecution and the judge uh and that he uh he alluded to the fact that the prosecution and the judge seemed to be very friendly. And there was, yeah, I guess shenanigans might be the best word. Maybe you can comment on what you saw as it related to anything messy in the trial, David.

David Morris:
[16:10] I mean, a lot was messy. And with all due respect to Roman, though, I will say I think that Judge Fila did throw a lot of decisions to the defense as well as the prosecution. And some were pretty substantial in terms of like setting the table in a way that let them get their point across. So, I mean, for example, on this question of crypto kidnappings and blackmail and things like this. So obviously the defense wants to put forward the broader context of there's a privacy issue here with life on the blockchain.

David Morris:
[16:46] And this product was created to fulfill a very specific need. And there was this kind of like entirely non-criminal reason that Roman Storm was building this tool. And part of how they, you know, sort of ideally wanted to drive that home was to, you know, make reference to some of the crimes that have been committed

David Morris:
[17:05] against people whose holdings were visible on the blockchain. And, you know, Judge Fila, I think there was some misinterpretation, frankly, online of this motion in particular, where Judge Fila, you know, ultimately said the reason this matters is how much it speaks to Roman Storm's state of mind when he was creating Tornado Cash. Because, again, this conspiracy charge is about their mens rea, their state of mind, both during the creation and then to a certain extent ongoing in their operation of elements of the tornado cache system.

David Morris:
[17:41] And so what she allowed was anything that predated or coincided with the 2020 to 2022 period that was in question for the trial. She said, you can bring this up because it's plausibly an influence on Roman Storm's state of mind. And basically, she did let the jury let the defense bring that in in a certain to a certain extent.

David Morris:
[18:05] To show that this privacy issue was part of what shaped Romans thinking for building the tool. So, you know, I, I certainly, and to be clear, you know, we only have access to what's going on in, this is the third time he's tried it guys. This is Steve. Everybody say, I don't know what to do about the situation, but you know, anything that, so she, she, just to say that judge Fila, we don't have access to anything that's not happening in open court, But Judge Fyla, to my observation of that part of the proceeding, was really calling balls and strikes.

David Morris:
[18:41] And, you know, it's worth keeping in mind that at various stages, she has, you know, expressed skepticism of the government's case in proceedings that I think shows her open mindedness. Um, inevitably the SCNY lawyers, the prosecutors inevitably have a better relationship with the judge, um, than the defense. Um, this, this prosecution team specifically included Thane Wren, who was part of SBF's prosecution team. And he, you know, they, they just tried cases in this courthouse full time. They cross paths with these judges. Um, the defense team, I think mostly is based in California, closer to Roman. So they don't have that kind of intimacy with the judge on an individual personal basis. Although I will say the judge also seemed quite personally fond of one of the defense lawyers.

David Morris:
[19:38] Gosh, why am I forgetting her name? Axel, Carrie Axel. They had some good banter. So even on a personal level, the judge was not like icing the defense or anything like that that I saw.

Peter Van Valkenburgh:
[19:52] Yeah, I don't think there's shenanigans at stake. I would say that Judge Fela actually had a prior career as a prosecutor and did prosecute unlicensed money transmission crimes in the SDNY. So this is her territory. And I think some of that goes to maybe informing her legal reasoning, which I think is wrong. But that's the way our judicial system works. the judge rules on the law and that could be appealed. And so there's just absolutely nothing inappropriate there. But I think, I think she was in many ways, a tough judge for Roman to have, but a fair judge. And it's time to appeal that bad legal reasoning, which we'll get to later on.

Ryan Sean Adams:
[20:32] We could still appeal the count that he was convicted on.

Peter Van Valkenburgh:
[20:36] That's still, they will.

David Morris:
[20:37] And they've said, and they will.

Ryan Sean Adams:
[20:39] And what's the probability that that not only,

Peter Van Valkenburgh:
[20:41] Yeah, not only that, but, and this is something, so to go back to Roman's statement that Eleanor reported it's a big win the 1960 charge is bullshit and we're going to fight it all the way You know, I'm glad he's feeling optimistic. I'm glad he wasn't thrown in jail immediately. That was an important procedural step. He's right. It's bullshit. You know, Coin Center's been ringing the alarm bell on 18 USC 1960 and unlicensed money transmission prosecutions now for years, including working with FinCEN in 2019 to make sure that when they offered guidance on who's a money transmitter and needs to get a license in the crypto space, They offered really clear guidance that said the only people who need to register under our rule set and were the money transmitter regulator at the federal level are people with total independent control of customer funds. And, you know, Roman built some smart contracts and maintained a front end, but never had any control of customer funds.

Ryan Sean Adams:
[21:40] Peter, that was 2019 guidance that FinCEN, the only guidance that FinCEN, who is the regulator of this territory, has ever provided crypto has been basically that if it's non-custody, these things don't apply to you.

Peter Van Valkenburgh:
[21:54] You don't need to go get a license. You don't need to register with us.

Peter Van Valkenburgh:
[21:56] You don't need to worry about doing AML KYC. And so the question is, if that's been the law since 2019, if Roman's lawyers, because he had lawyers when he was building Tornado Cash, relied on that guidance and gave him regulatory counsel, if others in the space like Uniswap or God knows who else relied on that guidance, why are people being prosecuted?

Ryan Sean Adams:
[22:17] Okay, but here's what I don't understand. Why couldn't the prosecution just be like, here's our case. Here's the guidance that was given us. Here's the rulemaking from a regulator. Roman doesn't hit any of these boxes.

Peter Van Valkenburgh:
[22:30] You mean the defense. The defense, excuse me.

Ryan Sean Adams:
[22:32] Case closed. How is that not case closed?

Peter Van Valkenburgh:
[22:34] They did. And this goes to some complex issues here. So what we just learned about is the jury's verdict of the facts. But to me, one of the biggest losses in this case was actually last winter, and it's when Judge Fela ruled on the motion to dismiss. And the defense in the motion to dismiss on the unlicensed money transmission charge said, this is absurd. You know you're accusing of unlicensed money transmission but the regulator on point said that someone without total independent control doesn't need to license with us so like this this charge is utterly inappropriate and should be should be thrown out on legal grounds right not even fit for a jury to to rule on judge failup agreed with the prosecution ultimately that the criminal code, which is 18 USC 1960, has a different definition of money transmission than the Bank Secrecy Act, which is the regulatory code that FinCEN offers guidance on, and that they overlap, but are not fully coterminous. And so criminal code can be interpreted broader than the federal regulations under the Bank Secrecy Act, and therefore they can proceed with this prosecution.

Ryan Sean Adams:
[23:47] Wow. Someone should have mentioned that in the rulemaking. I mean, come on.

Peter Van Valkenburgh:
[23:51] Wow. Well, and it speaks to a lot of things that I think are going to come up on appeal and to Roman's sort of energy about that appeal is there's a massive due process issue here. You know, in this country under the due process clause of our constitution, you can't be held culpable for a crime if the law was not clear on the books as to what course of conduct you were and were not supposed to take. Right. And not only do we have a lack of clarity, we have basically contradictory statements from the regulator you'd get a license from and from the prosecutors who then say, actually, you did need a license, even though the regulator told you not to. And you have these conflicting definitions. You have ambiguities between the criminal code and the regulatory code. And when you have ambiguities, what are you supposed to do as an innovator? You're supposed to say, oh, well, should I listen to the regulator or should I read the criminal code myself or have my lawyer read it and just think about the worst way a prosecutor would squeeze that to hurt me. Now, if you're very risk averse, you might do that. And those are all the people who decided not to build tornado cash, right? Even though it's a good tech to build.

Peter Van Valkenburgh:
[24:50] And on the law, another thing that should be brought up on appeal, apart from due process, is lenity. If there's ambiguity in the code, like we don't know exactly what the word money transmission means because the regulator defined it one way and the criminal code you suggest defines it another. If there's ambiguity and someone's liberty is on the line, the rule of lenity in judicial theory in an American constitutional practice says that you have to interpret it in the way favorable to the person whose liberty is on the line, which would be a narrow definition of money transmission, not one that allows them to go after effectively anyone. So that aspect of this prosecution has always been hyper aggressive. And it really does stem back to the origins of this prosecution, which is the prior administration. It's not exactly like there was a massive conspiracy against crypto. But as we know from looking at Gensler at the SEC, from the policies at Treasury,

Peter Van Valkenburgh:
[25:40] From the investigations into other DeFi protocols, and from the prosecutions of Roman and the Samurai wallet developers, which was a Bitcoin privacy wallet. There was a lot of energy going after crypto. And some of that slowed down, some of that stopped. We got to a point where now with the SEC, Hester Peirce, the commissioner, is issuing amazing speeches about the importance of financial privacy and crypto.

Peter Van Valkenburgh:
[26:03] But it hasn't fully slowed down. It hasn't fully stopped.

Ryan Sean Adams:
[26:07] So Peter, if it is so obviously BS, right, you could understand why there's a world where you see why the DOJ and prosecution went after Roman Storm in this way, and maybe even failure. you're like allowing this case to continue. But what was in the jury's head? I mean, they still gave a guilty verdict. Why?

Peter Van Valkenburgh:
[26:25] They don't have much of a choice on that count, right? So on the counts where they were hung, where they were unable to agree, there were higher bars of proof for the government. If you're going to say someone's, you know, guilty of money laundering, you have to show that they had some specific intent to actually hide some specific proceeds of crime. Right. And the best that we we can see from any of the provided evidence is that they had some general knowledge. Roman had some general knowledge that the tools he's building might be used for those bad things. Just like if I build if I build a safe like a guy might put stolen jewels inside of it. Or just I can imagine the entire Ethereum network. Yeah, yeah. Like, yes. Anyway, so the standard is a little bit higher there. And I think it's clear that the jury struggled with voting yes uniformly, that the prosecution met their burden of proof with respect to mens rea. With an unlicensed money transmission charge, the standard for whether you knowingly transmitted illicit funds is lower. And there's a reason for that, because there's a predicate to that. It's not just I'm a normal guy walking around in the world and oops, I knowingly like took some money from a drug dealer and then used it to buy a can of Coke.

Peter Van Valkenburgh:
[27:42] No, the low standard for knowing that you're dealing with criminal funds only comes into play if you are not a normal person. You are a financial institution. You are an entity who holds itself out accepting and transmitting customer funds. Your credit suisse and Russian oligarchs show up at your door. You have some due diligence to do. You can't just be like, la la la la, I'm going to move this money. And so that lower standard that the jury found the prosecution met That might be fair, and the jury's determination might be fair, if Roman was a money transmitter, if he had day-to-day exposure to other people's money and actual control over it. But he didn't. And so applying that standard and asking the jury to judge him by that standard is inappropriate. And it's not the jury's mistake, it's a legal mistake. And that legal mistake goes back to those motions last winter when Judge Fela said, yeah, I know FinCEN said that this isn't money transmission, but the definition under the criminal code is broader. So I'm going to treat him as a money transmitter. I'm going to say that he's a money transmitter. And now this lower standard for the jury will apply.

Ryan Sean Adams:
[28:47] Wait, so you're saying that the jury was basically given instructions to say that, first of all, jury, Roman's activity was a money transmitter. Now, based on that criteria, now render this judgment on this 1960 count.

Peter Van Valkenburgh:
[29:00] They were given standards to say that money transmitters includes people who have, have sort of secondary or tertiary involvement in the transfer of funds, not necessarily just people who have total control over customer funds, which is FinCEN standard. So they were given what I think is an incorrect interpretation of money transmission, and then mostly given this task to focus on this low burden of proof for knowledge of illicit funds.

Peter Van Valkenburgh:
[29:26] And I'm speculating, because I wasn't in the room with the jury deliberations, but I'm speculating that the jurors were able to come to unanimity on that lower standard of culpable conduct, which is relevant for money transmitters, but were unable to come to agreement on those higher standards for culpable conduct for money laundering just as an individual or for sanctions evasion as an individual, not with that heightened standard.

David Morris:
[29:51] And Peter, would you summarize the difference in the standard as being between knowledge of and intent to?

Peter Van Valkenburgh:
[30:01] Yes. Yes. The intent requirement's important in the money laundry charge, whereas it's more of just a knowledge standard in the money transmission case.

David Morris:
[30:12] And if I could like...

Peter Van Valkenburgh:
[30:13] And it makes sense. Think of it intuitively. Again, go back to Credit Suisse. Credit Suisse probably doesn't intend to launder oligarch funds, but if they have knowledge of it and they don't take action and they're a money transmitter, they should be culpable for that activity, right? They had some due diligence and they failed it. But a normal person, unless you intend to actually hide the proceeds of crime, if you just merely know that you've been handed some proceeds of crime and then transact with them, then applying that lower standard as culpable conduct doesn't make sense from a liberty standpoint, just from a freedom standpoint.

David Morris:
[30:47] And if I can sort of extend the thought experiment about kind of the jury's state of mind and what they'd been shown in court, I mean, I think that that question of intent is key and was really focused on by both the prosecution and defense and closings. And that sort of brought in a few things that I think are going to be very interesting to on both sides to your listeners in particular. So the prosecution really worked hard to show that or to draw out examples of Roman.

Peter Van Valkenburgh:
[31:22] And the others

David Morris:
[31:23] Kind of talking about criminals and the impact after the fact in particular of like, we're going to get in trouble basically because we're seeing these reports that ronin has been funneled through tornado cash things like that um going back a little bit further probably the most um damaging bit of evidence on that intent question um for roman from president of the prosecution was some people might already be familiar with this t-shirt that tornado cash created circa 2019 um this is very early if i'm not mistaken this was actually at the hackathon where they initially created the protocol or an early version of the protocol um they wore these t-shirts they had a washing machine and tornado cash logo um and various slogans about i think one of them was if you want to know how to keep your ethereum private ask me something to that effect um and the prosecution really went to the mat to make the point that this washing machine is a very literal metaphor for money laundering. And so this came forward as their sort of evidence for, you know, this was a criminal enterprise from the start run as a criminal business.

David Morris:
[32:36] And I think it's quite notable that we did have this split verdict because, you know, the evidence presented by the defense on the other side of that mens rea question was um ethereum community uh sentiment that was cited by a lot of defense witnesses to the effect of the importance of these privacy products for users of the system things like um vitalik having communicated with roman about the importance of privacy technology as a next step for ethereum um i think that what it reflects in the.

David Morris:
[33:07] Reading the tea leaves, obviously, a little bit, but I think that we can see a jury that seriously, the idea that privacy technology was important for this, like, legitimate entity, legitimate project of Ethereum and of cryptocurrency. And so I see a really pretty, and again, I'm like three inferences down the road on all this, but I do see some like really some major silver linings in that split decision, even though it can theoretically be retried. So we're not off the hook on that stuff. But that idea that you, I think, did have a jury where at least a few members kind of saw the innocent application of this technology as legitimate. And, you know, there were defense witnesses who talked about their usage. And so the defense did present that in other ways, too. But I think that was one of my most optimistic takeaways. ways.

Peter Van Valkenburgh:
[34:09] And again, you don't need to retry the facts. When this gets appealed, I think the big thing for that 18 USC 1960 charge is going to be whether Judge Falla, back last winter when she denied the motion to dismiss, got the law wrong.

Peter Van Valkenburgh:
[34:25] And she should have dismissed that charge because that charge was inappropriate. And the rule of lenity, which I talked about earlier, ambiguity should be on what is money transmission, should be ruled in favor of the criminal defendant. It's wrong on the due process defense, because obviously he got contradictory statements from the regulator as to what money transmission was. And so being convicted of unlicensed money transmission is inappropriate here from a due process standpoint. And statutorily that the U.S. Criminal code, that definition should be read in parity with the regulatory definition from the regulator. Otherwise, we're just having nonsense interpretation of the U.S. Code. So Those are all legal questions. And when you bring a criminal case on appeal, you can't really, unless there was some sort of manifest issue with the way the jury did its fact finding or the way the jury did its deliberations, you can't retry the facts. But the legal questions, which were all to do with that motion to dismiss, are definitely fully ripe for de novo review. The judge at the appellate court can say, no, Judge Fela got the law wrong, so the jury found certain facts, but those were not the right facts to find, to find them guilty, so we're going to overturn that charge. And I think a lot's going to be left to Brian Klein and the defense team as to exactly how to do that strategy, but I think I've laid out some of the best arguments here that I expect them to pursue.

David Hoffman:
[39:06] There seems to be grounds for an appeal to go to to be appealed and then go our way with force and direction especially when we like maybe i'm gonna have to tap into your legal mind here when we re-roll the dice on the court and we now have a new department of justice that's under the trump administration not the biden administration where this court case with Rowan got started in the first place. Like I, I continue to be looking at this thing with a glass half full, but maybe I'm naive.

Peter Van Valkenburgh:
[39:35] So there's, there's a few things to be cautious about. One is that that count one, which was money laundry and then count count three, which was sanctions evasion where the jury couldn't decide the prosecution could decide to retry those charges because the same prosecution,

David Hoffman:
[39:49] The same people again.

Peter Van Valkenburgh:
[39:51] All we have is a mistrial. We don't have a not guilty verdict. So there's no double jeopardy at play here. And so that'll be one of the first things we'll find out about whether this DOJ is taking a different approach than the Biden DOJ that brought these charges originally. And we'll find that out probably in the next few days. The second caution is, all right, so with the guilty charge, your only strategy, if you're Roman, is to appeal it to the appellate level and challenge especially that motion to dismiss and how Judge Fela might have gotten the law wrong. A lot of that's going to come down to who they get on appeal. Like some judges there are going to take a more textual approach to the way the U.S. Code should be read. Some might be more prosecutorial friendly as to the way that like prosecutors should actually have leeway to to interpret broad laws in certain ways, and others will be more defendant friendly that the rule of lenity, you know, controls that if there's ambiguity, it should be resolved in favor of the criminal defendant. So, you know, that's going to be tough and ultimately it could even get appealed up to the Supreme Court. The questions of statutory interpretation, like what is the underlying law, are I think significant enough that you could see that going all the way up. I like to think that there's a lot of good textualists out there who will look at the us code and and think that interpreting these words to mean that you're doing money transmission even if you're just publishing software is absurd um but i could see that going in different ways just

Ryan Sean Adams:
[41:14] Precisely can we talk about like how that happens so there's an appeal what's the time delay when does that uh appellate court have to give an answer and then it could be appealed again like how long what's the duration of this thing how long is it going to play out in the different kind of branches of possibility here.

Peter Van Valkenburgh:
[41:30] David, you might have more experience with criminal appeals. We've brought some civil suits ourselves, and I'll tell you it's on the order of months and years. But I don't know, David, you have something to think about.

David Morris:
[41:39] No, I mean, I'm not intimately more familiar, but that is definitely the scale that we're talking about. And, you know, again, makes it all the more good news that Roman is going home this weekend.

Ryan Sean Adams:
[41:51] Because the prosecution could have had him in jail, like if they won their argument, They could have had him in jail for like years while this was playing out through appellate court. Yeah.

David Morris:
[41:58] And there was a motion to remand. And I apologize. We did another show immediately before this one. And I can't remember what I have and haven't talked about. But, you know, the fact that Judge Fila in the course of denying this motion to remand did refer to the appealability. And even the like, I think basically her language was there are many options to appeal this conviction. And so that was that was quite encouraging to or quite good for the defense to have the judge just acknowledge that it's something that's out there.

Peter Van Valkenburgh:
[42:30] And Roman's been so respectful in court. He's never missed a court a court date. Like the idea that he'd be a flight risk when he's obviously become a public figure because of this case who's fighting for his rights, like is absurd. I think it's actually quite sad that the prosecution pushed for that, you know, immediate remand to jail. it

David Hoffman:
[42:48] Seems punitive it seems like they're just trying to twist a knife that was

Peter Van Valkenburgh:
[42:51] Bad for yeah and this this gets to some hard questions that i've been struggling with here at coin center is you know president trump comes in with with this you know let's make america the crypto capital of the world verbiage and i want to get on board and i believe in some of it i've seen huge changes at the sec you know which we've you guys have talked about on other episodes of this podcast and we've talked about a lot but then we still see in the unlicensed money transmission arena the charge that actually stuck with Roman and the jury, because I think of the bad legal reading from Judge Fela,

Peter Van Valkenburgh:
[43:28] Not as much support from the administration. So there was a memo from Deputy Attorney General Todd Blanche, Trump's Deputy Attorney General, saying we're going to end regulation by prosecution. And if you ask me, this is the clearest example of regulation by prosecution, because the regulator said you don't need to get a license, but then the prosecutor said you needed to get a license, you're being charged with unlicensed money transmission. So it's really a prosecutor making law by charging people with felony crimes. And so you might say, all right, well, they published that Todd Blanche memo that said we're going to end prosecution by regulation. There are vagaries in that memo that allow you to read it as we're only going to stop these prosecutions in situations where it's really just somebody who published software and had no knowledge of or involvement with any criminal activities, you know? And that brings us right back to this. If you take that to the absurd extreme, everybody who publishes software has knowledge that it could be used by criminals. Like that is the nature, especially open source software. That is the nature of open source software. And so there was a way to read that memo from Deputy Attorney General Blanche that the prosecutors in the Southern District of New York seized upon, they dropped one of the two unlicensed money transmission charges.

Peter Van Valkenburgh:
[44:48] They said they're not going to bring one of the two charges to trial. And that was the one where they said, you failed to register as a money transmitter. And the only one they brought was, you are a money transmitter and you knowingly transmitted criminal funds. And so there's a way to read that as, oh, we're sticking to the guidance from the deputy attorney general memo, because this one involves knowingly transmitting criminal funds. But again, they weren't transmitting. And so, you know, that that charge should have been thrown out from the beginning. And that knowledge standard is inappropriate in this context, because if we're going to apply a low level knowledge standard that your code could be used for bad things, everyone's going to still be potentially on the hook for regulation by prosecution. So I would have loved to have seen another memo from Trump's Department of Justice.

Peter Van Valkenburgh:
[45:36] And I hope on appeal we can get some statement, some guidance that like this is the way the law should be. I hope that the administration defends the FinCEN 2019 guidance and says that's actually the standard we think is the correct standard. And the last thing I'll say on this is, so CoinCenter is supporting Michael Llewellyn. He's a software developer who lives in Fort Worth, Texas. He developed a protocol called Pharos that is a GoFundMe type crowdfunding protocol, but non-custodial. It's all done on chain, and it uses privacy pools type technology to keep donors anonymous when they're giving to good causes and they want to fund them. Coin Center wants to use this tech because we're a nonprofit and we want to raise money this way. Michael is suing the Department of Justice in Fort Worth, Texas for declarative judgment saying, I see what you're doing against Roman Storm. I'm publishing software that's very similar. I'm going to maintain a front end, too, very much similar to the way the Tornado Cash Protocol worked. I'm not going to publish this stuff until you give me declarative judgment that I'm not going to be your next target for unlicensed money transmission prosecutions. And

Peter Van Valkenburgh:
[46:46] What's interesting is we supported Michael when he first brought that case right at the end of the Biden administration. So the original defendant was A.G. Garland. And then the defendant changes to A.G. Bondi. And even with A.G. Bondi as the defendant, the defense in that case filed for a motion to dismiss saying Michael faces no credible threat of enforcement. Meanwhile, Bondi's DOJ is continuing its prosecution of Roman Storm.

David Morris:
[47:14] And if I could offer a slightly downbeat extension of these observations, I think that one way to read this that tends to be mine is that, you know, the Trump administration, Trump DOJ and whatever conjunction there they exist, you know, they're making these noises that a certain segment of their base of support that's in the crypto world sort of has a general sense of what's being discussed

David Morris:
[47:40] in a general sense of maybe the vague goals. But when the rubber actually hits the road and you're looking at something like tornado cash, I think probably a lot of those same people might recoil at the implications of what, at a very high level, their political leaders are promising them. And I think that that's also reflected in, unfortunately, you know, I felt, luckily we had a very generous supporter who was able to send me to do this work. But, you know, the media model is not what it used to be, and the coverage and attention on this trial has been, I think, minuscule relative to its potential impact and its implications.

David Morris:
[48:18] And so I think that it is kind of just this... Unfortunate and uncomfortable gap, both between political rhetoric and legal reality and between, frankly, the public's sort of signaling of enthusiasm for certain ideas versus actual commitment to following the legal process, paying attention to people who are in jeopardy in connection with these things and taking action to influence those things. It's just, there are certain things that are fun to say and a lot of hard work to really pay attention to.

Ryan Sean Adams:
[48:50] Okay, but going into that, so what would be the ideal thing that you'd like to see the Trump administration do? So Peter, you mentioned the DOJ publishing a memo, right? So let's say they publish a memo. Does that like call off the dogs in the appeal?

Peter Van Valkenburgh:
[49:04] Or is it just... If we pause and rewind, like the Trump administration pressured the Southern District of New York to drop the charges against Eric Adams, the mayor of New York City.

Ryan Sean Adams:
[49:15] Right.

Peter Van Valkenburgh:
[49:16] And they did. Right. And so ideally, they would have just dropped these charges, at least the unlicensed money transmission charge, because, you know.

Ryan Sean Adams:
[49:24] And they haven't. So in not doing that, that's a decision.

Peter Van Valkenburgh:
[49:27] That was a decision point that went

David Morris:
[49:30] The wrong way. But I should say that I my interpretation or, you know, my inference, I doubt anybody in a position of real influence in the Trump administration is actually like in the White House is even actively paying attention to this. I think that like the DOJ has its own process. And, you know, obviously there are people there paying attention to it. But in terms of like, you know, Pam Bondi, her even herself probably doesn't know this is happening.

Peter Van Valkenburgh:
[49:57] I mean, I'm not so sure. Sure. I think there are plenty of people in Treasury and in DOJ who are aware of the tension between national security and privacy here, and that Tornado Cash has become a lightning rod sort of test case for those questions. And I think possibly because of fear of bending too far in the privacy direction and away from the national security direction, listening to people who've been, you know, involved in these battles for a long time, I'm not going to like, sort of like deep state type stuff. Like, you know, I'm not so sure. I think i think that it may not i'm

David Morris:
[50:36] Saying is that the political cadres the the the public faces the not so deep state um have not chosen to intervene because i don't know about their level of awareness obviously i think that what you're saying is.

Peter Van Valkenburgh:
[50:48] Absolutely yeah i mean you look at the president's working group report which came out last week actually on crypto and this is this was like the end document for the mission that they were set on at the beginning of the administration to make America the crypto capital of the world. There is a section in there that says Congress should pass the Blockchain Regulatory Certainty Act. The Blockchain Regulatory Certainty Act addresses exactly the charge that Roman is convicted of in trial today. It says that if you are a non-controlling blockchain developer, you are not engaged in money transmission and should not be liable for unlicensed money transmission prosecution. Oh, so that's great. Yeah, it's great. And it's in the PWG report. And for that, we are grateful and thankful.

Peter Van Valkenburgh:
[51:37] But they're kind of they're pushing it off to Congress to to pass that law to offer that clarity to to rein DOJ in. And now I should be charitable. There is historically a sort of wall of separation between the political powers and the DOJ. for the very reason that the DOJ is also there potentially to investigate and charge the president, right? And so the DOJ guards its independence. The Southern District of New York as a subdivision of the federal DOJ, it sees itself, perhaps rightly so, as a very autonomous body. So maybe there just wasn't the political will to give firm pressure on these charges. But But this is where we are now. And so, yes, the president's working group on digital assets is calling for Congress to fix the unlicensed money transmission issue. They don't identify tornado cash by name, but they're calling for that fix. And that is massive. If we think about where we were a year ago, I've gotten greedy and crazy. I'm like, that's amazing.

Ryan Sean Adams:
[52:43] Yeah. But ideally, we'd have the truth social post about this case, right? I mean, that would be the ideal scenario. And there would be some focus on it.

Peter Van Valkenburgh:
[52:51] I mean, I'll say it right here that that tweet that Eleanor Tarrant put out with Roman's statement where he said that the 1960 charges bullshit. The next thing that Roman says in that tweet is, you know, like Trump says,

Ryan Sean Adams:
[53:04] Yeah, yeah, yeah.

Peter Van Valkenburgh:
[53:06] I think it's a not so not it's not so subtle nod to the guy that can potentially pardon him or at least apply some pressure here. And that'll be interesting. I mean, I wouldn't rule it out.

Ryan Sean Adams:
[53:17] Let's talk about where we are now, though, because we're in this gray zone area. It's not a great spot to be for open source software developers for non-custodial DeFi projects. Let's put privacy aside, all right? So privacy is a thing, and there's national security concerns, and it's a thing, right? We can understand. Part of the government at least thinks so. But this has sweeping ramifications for all non-custodial DeFi projects out there. And let's remember, this is precedent. So there was a guilty charge. And they said that, you know, the Tornado Cash, the protocol, maybe the app as well, maybe both pieces, like fit under the money transmitter definition. So, I mean,

Peter Van Valkenburgh:
[54:02] Does that- A few cautions.

Ryan Sean Adams:
[54:03] Okay, so that doesn't seem great though, right? Are we in a bad place?

Peter Van Valkenburgh:
[54:07] So I'm going to say, I'll say two things. One, you're absolutely right to point out that set privacy aside the DOJ's theory of the case in this prosecution has never relied on we're able to go after Roman for this stuff because his tool was privacy protecting. The unlicensed money transmission thing is just you were transmitting money, which he wasn't, because their definition of transmitting is insanely broad, and you knowingly transmitted illicit funds. It says nothing about whether you hid them.

Ryan Sean Adams:
[54:36] And so- So let's be clear, that could happen to Uniswap, that could happen to Aave, that could happen to any DeFi protocol if a bad actor starts using it, a sanctioned actor.

Peter Van Valkenburgh:
[54:46] So the theory of the case is incredibly broad and potentially reaches effectively all DeFi developers irrespective of whether they're using zero knowledge proofs or some other cool stuff which they should be using by the way because it's good tech but even if they don't they're on the hook for prosecution here if

David Hoffman:
[55:00] They run a front end right

Peter Van Valkenburgh:
[55:01] Well i mean no

David Hoffman:
[55:04] Even even more than that

Peter Van Valkenburgh:
[55:05] The government's theory of what is money transmission is just extraordinarily broad and that's why again that ruling as as to whether that that should stand and and feed into jury instructions that then that happened back last winter is so problematic like

Ryan Sean Adams:
[55:21] Like like your home ethereum validator

David Hoffman:
[55:23] Yeah what's that any anything that has any modicum of surface area to a transaction

David Morris:
[55:29] Yeah i mean i can actually there was a specific exchange in the trial um i believe one of the defense witnesses um our defense with one of the defense witnesses the defense asked him you know, does an Ethereum node help operate Tornado Cash?

David Morris:
[55:46] And the answer was yes, of course.

Peter Van Valkenburgh:
[55:48] Yeah. Yeah. And there were questions about folks that invested in PepperSec, the company that Roman started to build Tornado Cash. Frankly, if you read the law that the government is arguing is the binding law here, the way the government's reading it, a Bitcoin core developer is a money transmitter and needs to do KYC AML on everyone who uses the Bitcoin platform. I'm like, wow, there's an absurdity here and it's not bounded by law. It would only be bounded by prosecutorial discretion. Like, oh, well, we just won't go after the ones that are, you know, and that's not how the law is supposed to work. I think it's on.

David Morris:
[56:23] Oh, sorry. Well, let me take this on a slight entertaining diversion here and hold like so speaking to the issue of the investors. I think this is this was another one of the really wild procedural moments of the trial because the defense wanted to bring in an investor from Dragonfly Capital, who actually were the primary funders of Tornado Cash, and the investor whose home we later found out had actually been raided as part of the investigation, he pled the fifth. And I can't recall at the moment exactly what it was that the defense was trying to elicit from this witness, but mostly, I think, probably to the effect that Tornado Cash was It's a promising technology that we invested in because it serves an important purpose in XYZ ecosystem.

David Morris:
[57:10] He pled the fifth because he believed he might still be under threat of investigation himself, just having been an investor in this thing. And his communications were also used to establish venue for the charges. Now, the reason that this is interesting is not that he had like in his own mind some fear of this, but that in a hearing on a Friday when the jury was not present, the prosecution declined to state that he was no longer a subject of the investigation. They used this term subject and not target, and that became somewhat misunderstood and perhaps amplified a bit. But they actually also had this segment of the trial expunged from the transcript and then on Monday put into the transcript that they actually had not in any way signaled that this person was still a target of the investigation. So there was a real two step in terms of we're going to put it put forth just enough of a threat against this witness to make them credibly plead the fifth and not come testify for the defense. But then we're going to actually just withdraw because this is absurd, because this was an investment that was made five years ago. And also investing in something is like a very strange way to impute criminal intent. So, you know, this is just a little side note that I found interesting.

David Hoffman:
[58:27] Do you think that that was a 4D chess move by the prosecution or was they just making the next logical move in one move after the other?

David Morris:
[58:36] I mean, frankly, that's how it read in the courtroom.

David Hoffman:
[58:39] Which one? Which?

David Morris:
[58:41] As a 4D chess move where the prosecution is going to suggest just enough threat against this witness to make it credible. Because, you know, if you can't just plead the fifth and say, like, I'm pleading the fifth, you have to have a good reason. And the judge in this case, in this moment, had the option, kind of overriding or rejecting his Fifth Amendment plea and saying, no, you don't actually face any credible threat of implicating yourself in this. And the judge ultimately declined to do that in part because the prosecution was continuing to, in so many words, suggest that his name is Tom Schmidt from Dragonfly, was potentially at risk of being implicated in what was going on and then pulled it back on Monday.

Ryan Sean Adams:
[59:26] The bounds of this are even broader than what you're saying you peter you said it was boundless right it's like we're talking about you running a node being like a developer this is an investor are you an eth holder like

David Hoffman:
[59:38] What the hell yeah

Peter Van Valkenburgh:
[59:39] Remember that it's not just an unlicensed money transmission charge with an incredibly broad theory of what transmission is it's conspiracy to do unlicensed money transmission which means you just need to agree with one other person to commit the target offense and take one credible step towards commission of the offense like invest in a protocol

David Hoffman:
[59:59] Okay but this is why i don't actually have any fear about this because of the level of absurdity that it that is too many of us it's like yeah it's the whole they're trying to take down the whole entire system and so at some point like i don't care about the outcome here because it's absurd and the level of absurdity is actually giving me a sense of like solace.

Peter Van Valkenburgh:
[1:00:23] I mean, a couple of years ago, I'd say, yeah, it's absurd. But like, watch how many devs end up going to jail, right? We're lucky that it seems like politicians on the Hill, the president, and this isn't just partisan, it's on both sides, like are finally getting that. Like, what are we getting for this villainization of developers? Like, what's the bang for buck here? like who are my voters who are like yeah go after those crypto devs like what and so and so i i think the winds have changed but there was a time a couple years ago right um but

David Hoffman:
[1:00:59] But now now we're today right and roman feels pretty i'm guessing like as he said ready to appeal to overturn this to to re-roll the dice and he feel good about he but

Ryan Sean Adams:
[1:01:12] Here's the thing right it's like while we're while we're still open here to this like boundless prosecution it just depends who's in power right it's like we we would have thought it was bs but we got shane uh coplin the founder of polymarket fbi busted in his house all these raids happened jesse from kraken how absurd is that roman storm all of these things next is it going to be hayden adams from you a lot of

Peter Van Valkenburgh:
[1:01:35] A lot of that happened before the change of administration.

Ryan Sean Adams:
[1:01:38] Exactly.

Peter Van Valkenburgh:
[1:01:39] It seemed to cool off after, and maybe we're just still suffering the hangover of it. And this is a guilty verdict. So to go back to your earlier question, Ryan, about precedent, it only has persuasive precedent. So this is just one verdict in one case in the Southern District of New York. And so similar cases in other districts, in other circuits of U.S. Federal court system can look at it and think, yeah, those are some good points

Peter Van Valkenburgh:
[1:02:07] or they can disagree with it. And even in this other district of New York, another judge with another case can try certain things differently. When we get up to the appeal, which will be so important, and that's why I'm super glad Roman is so gung-ho and like fight, fight, fight about this. Then we start getting into the world of like, now we're talking about binding law for first the Second Circuit, where the Southern District of New York is, and then later if it goes up to the Supreme Court.

Peter Van Valkenburgh:
[1:02:31] Then we're talking about binding law and what transmission is. It's still very bad. And this goes back to my earlier point about Michael Llewellyn, the software developer who's challenged in Fort Worth, we're supporting. Like, yeah, it's bad. He faces a credible threat of enforcement. Even if it's just the Southern District of New York that's gone crazy like this, they claim jurisdiction over anyone whose software they can run on a server in the Southern District of New York. So like Michael lives in Fort Worth, Texas. He's seeking declarative judgment from a court that hopefully will be more skeptical of administrative overreach and the powers of tyrannical governments. But he could easily get dragged into the Southern District of New York if he doesn't get declarative judgment in Texas. If they just install Pharos, the privacy-preserving client he's building for fundraising, and then decide to go bully him like they've bullied the Tornado Cash developers and the Samurai Wallet developers, which we haven't talked about a lot, who got pushed into a guilty plea last week right in advance of this verdict, which is kind of interesting. I think there was probably a moment to apply pressure. And these guys are sharks. They're not bad at their job. They're just, I think, on the wrong side of the legal issue here.

Ryan Sean Adams:
[1:03:40] So as we close this out, maybe let's talk about the more optimistic scenario. So is there still, as David was glass half full, it seems like we can still win in a big way and crypto can win in a big way. So let's talk about if this goes to pellet court, gets tried again. Is there a possibility here, and what would this scenario look like, where we actually win and have some precedent that non-custodial open source software developers do not apply here for this type of money laundering legality?

Peter Van Valkenburgh:
[1:04:16] Three paths to an optimistic outcome. One, Roman appeals to the Second Circuit Court of Appeal. His lawyers argue among other things that the rule of lenity controls and therefore the ambiguous divergent interpretations of what transmission is between fincens regulatory definition and the criminal code get resolved in favor of the defendant whose liberty is on the line hence the rule of lenity now effectively fincens understanding of transmission which is you accept and you transmit, which means you have control at some point, is the law of the land, at least in the Second Circuit.

Peter Van Valkenburgh:
[1:04:57] And then Roman gets out. That's the end of that.

Peter Van Valkenburgh:
[1:05:01] Path two, Michael Llewellyn in Fort Worth, Texas. He's right now fighting off this motion to dismiss because the DOJ is saying you don't face a credible threat of enforcement. I think that's nonsense because his course of conduct is very similar to the publishing the software and the technology that Roman did and maintaining a front end as well. So maybe the court in Fort Worth denies the motion to dismiss that the government's pushing for and instead rules that he gets declarative judgment that the law, the statutory law of the Bank Secrecy Act and the Criminal Code 18 U.S.C. 1960 should be interpreted such that this is not transmission and he's not on the hook for a potential unlicensed prosecution. That could get appealed up to the appellate level. The government might challenge it, they might not. And then that kind of depends on how broadly precedential it is for the rest of the country. The third and perhaps cleanest and quickest option, unfortunately, I'm realizing what I'm saying, that Congress is the quickest option. That also tells you how different things are from a few years ago, though, is the Blockchain Regulatory Certainty Act, which defines a whole category of persons as non-controlling blockchain developers and service providers. And so it's not just open source software publishers. It's like people running nodes. It's people who are operating front ends as long as they're non-custodial. These people are not money transmitters and are not engaged in money transmission and should not face liability for unlicensed money transmission prosecution. If Congress passes that,

Peter Van Valkenburgh:
[1:06:28] Forward looking, you know, it's too late for Romans, too late for the samurai developers, but forward looking, we're set. Now that law has already been attached to clarity, which is the big market structure legislation that Congress is pushing and the president wants them to deliver.

Peter Van Valkenburgh:
[1:06:43] It's passed the House with an overwhelming bipartisan majority, which I'm like still kind of in shock about, but so happy that we managed to convince enough members of Congress that this is an important issue. And now it's headed to the Senate. The Senate has to create its market structure package. They don't really like to be bullied by the House, so they've got to do their own thing. And that's fair. But the Senate discussion draft already has this Blockchain Regulatory Certainty Act language in it. So that's the starting point of negotiations. We just need to hold on. Oh, God, I'm going to make a hodl joke. And then pass it in the Senate, which will happen over the next few months if it happens by the end of the year. And so there will be a key moment where we need to call our senators and say, like, this matters to me. Roman's prosecution was horrendous, and I want to develop stuff like that because it's good for people's privacy. If we pass the Senate, the president has already said, Trump has already said he's going to sign it. He wants the BRCA in there. Then we fix this. Wow.

Ryan Sean Adams:
[1:07:42] And that would be hard-coded.

Peter Van Valkenburgh:
[1:07:44] That'd be hard. Yeah. Hard-coded insofar as it would take another act of Congress to change the law. Whereas, you know, the regulator, which is Treasury, you know, if we've talked about FinCEN as the good guy here for a long time, because their guidance was based on total independent control, it's just guidance, a hostile future FinCEN, either in this administration, if they completely change their mind on things, or in the next administration, they could write new guidance and say, no, actually, money transmission includes all these sorts of things, you know, they could, they'd be hemmed in a little bit by the statutory definition of money transmission. But that statutory definition is, you know, unfortunately capable of being read different ways. So, yeah, we'd be in trouble. And if Congress actually just created clarity

Peter Van Valkenburgh:
[1:08:26] here, that would be great. Oddly, the bill that it's attached to is named clarity. So we're just we want clarity through clarity.

David Hoffman:
[1:08:33] Well, Peter, three different possible paths makes me feel good. The more paths, the better. One of those paths is being taken. Nonetheless, less. The other two are in the courts and each one of those is a gamble. But man, when you sumate all of those together, I feel like maybe I'm just the guy who's feeling good today. But like when you add them all together, I feel like there's a pretty good likelihood of outcome. Like check me on that. What do you feel?

Peter Van Valkenburgh:
[1:08:59] And I hate to say it because Roman's in such a good mood. I'm going to say it like at least based on that tweet. Like I hate to say it because nobody should be found guilty of an absurd crime like the regulator told you not to license and then and you're guilty of unlicensed

Peter Van Valkenburgh:
[1:09:11] conduct. But Roman's in a good mood. He's ready to fight, so I'm gonna say it. Roman's loss is a good way, I think, to galvanize support, to convince folks in the Senate that this is actually something that matters. The BRCA needs to pass. And I think it's also a good way to convince the district court in Fort Worth, Texas, that Michael Llewellyn faces a credible risk of prosecution because, look, somebody was just found guilty. And so Roman's taken one for the team in a way by by pushing those other initiatives forward with what just happened.

David Hoffman:
[1:09:43] Yeah, what I'm seeing here is an opportunity to really slingshot us forward into a much better equilibrium. Some some things have to go right, but they don't seem that crazy. I think we've been stacked up against crazier odds in the past. David, we are technically at the end of this one court case. It actually now feels like we somehow ended it in the middle of a game. Now we just jumped backwards into inning four or five. What are you looking at in the short term? What is left to come out? We're looking at the prosecution to see if they are going to just try and do this all over again. What are you looking at in the short term in the next few days?

David Morris:
[1:10:24] Well, in the very short term, I'm looking at a nap. But in the next.

David Hoffman:
[1:10:28] Week or so – A well-deserved one, I will say.

David Morris:
[1:10:30] In the next week or so, we will get motions from both sides. I'm not sure, and maybe – I mean, maybe Peter will know better than I, but I'm not sure we'll actually get any decision on whether they're going to refile those charges for a little bit longer. I don't think – I don't feel like we're going to get like a recharging in a week. I think that's probably a longer process. But, you know, we will get an appeal notice. We won't get details of the appeal for a little while longer, but we will hear relatively soon about appeals. I mean, we already know the intention to appeal, so that's not really going to make much difference. But there might be some follow up motions from from both sides that will give us something. So I guess maybe my answer is that we actually don't have a lot of new clarity coming our way immediately. But maybe Peter has more insight into the refiling part of the process in particular. But I guess it's criminal, too, so it's not your special amount.

Peter Van Valkenburgh:
[1:11:28] Yeah, and I think a lot's going to come down to some hard choices at the Southern District of New York. And I hope that we'll have another moment for the Trump administration to apply some pressure there. I think one thing I just saw was that apparently Jay Clayton, who's former SEC, you might remember the name, and is acting U.S. Attorney for the Southern District of New York, said in praising the prosecution, The speed, efficiency, and functionality of stable coins and other digital assets offer great promise, but that promise cannot be an excuse for criminality, adding that criminals committing age-old crimes like money laundering undermine the many innovators who operate lawfully. So Trump's appointee to the Southern District of New York right now is praising the prosecution. And also, maybe this is a misquote, but seems to be confusing the money laundering charge with the unlicensed money transmission charge. So that's not a great sign. But at the same time, he's acting U.S. attorney for that district. So he's not going to criticize his own prosecutions. My hope is that they just sort of like take their win and don't refile those other two charges. I think that's probably more likely. And my hope is that the appeal goes forward. Yeah.

David Morris:
[1:12:44] And I will say this is the way in which, in some senses, the hung jury could be a bad outcome for the broader environment, because if they don't refile these charges, then there is not a chance to set a precedent in the negative. There is not a chance for somebody to be found not guilty in this kind of situation, which does, you know, again, have like that precedential, at least some sort of exemplary power going forward. And so on some level, obviously, the legislative solution that Peter is talking about closes a lot of these ambiguities going forward. But at the same time, I guess ideally we would have had a not guilty verdict that would have, you know, basically made some kind of statement about the relationship between a developer's intentions and the uses to which a tool is put. And currently, we don't have whatever would have been taken away from that. And if we don't get a refiling of those charges, And again, leaving aside the legislative issues, it might wait for somebody else to fall into this trap and have to do all of this all over again.

David Hoffman:
[1:13:54] Yeah, I see that perspective, David. I also do see the perspective that Roman Storm is flying home a free man tomorrow to see his daughter. And while that's not a legal precedent, that is what is truly happening. And so call it soft precedent. And so I do appreciate that fact. And yeah, as an industry, we live to fight another day to do this all over again. And like Peter said, I think we all feel a little bit more galvanized. There are multiple paths towards the happy outcome here.

David Hoffman:
[1:14:25] And, you know, we got there from a variety of different efforts. David, your reporting every single day in and out was just incredibly valuable. Thank you. Thank you, David. Peter, your support from Coin Center and then also Roman Storm himself. Yeah like i alluded to uh a second ago we we thought we were at the ninth inning and we finished a game but we actually just got teleported back to ending four and so now we're gonna have to do this all over again roman is going it sounds like potentially going to be appealing this so we can seal this and get a final sealed victory for roman and for the industry which will take more money uh and uh you know and and david what you're doing at the rage uh It has been incredibly valuable. I would like to tell all the listeners that Bankless sent you $5,000 yesterday just as a donation to what you're doing. So you can continue doing it. If Roman goes on the offensive with an appeal, is what I'll call it, I hope that you can resume some of the coverage, which will take even more money to keep supporting you. You have a donation page, therage.co slash donate. We will put that link in the show notes. So any listener who has been consuming

David Hoffman:
[1:15:34] some of the Rage's content can just support some of your work there.

David Morris:
[1:15:38] And if I can just put in a little bit more nuance there, you know, Lola Leeds is the founder of the Rage and she and I have been, you know, working together a bit more over the last year. It has really been a productive relationship. And we're basically poised to start thinking about how we're going to expand and make this more sustainable. And so, you know, donations right now are essentially, you know, I would say a bridge towards a future where this operation becomes more self-sustaining and we begin, we're able to, you know, fund this kind of coverage on an ongoing basis. So it means a lot. Obviously, we really appreciate you guys' support.

David Hoffman:
[1:16:12] Yeah, of course. And then on Peter's side of things, you guys are doing the Coin Center dinner in New York in September. I will be in attendance. I bought a ticket. I'm looking forward to it. That is one way to support CoinCenter, but I believe you guys also have CoinCenter.eth as well.

Peter Van Valkenburgh:
[1:16:28] Yep, we have the coincenter.eth address. You can find our donate page on coincenter.org. On that page, you'll find a fun little radio choice between how would you like to donate anonymously or dox myself but get a free thank you gift, which is like a t-shirt, a Bitcoin t-shirt. I actually would encourage people to give anonymously.

Ryan Sean Adams:
[1:16:51] That's legal, right?

David Hoffman:
[1:16:52] It we okay to

Peter Van Valkenburgh:
[1:16:53] Do that it's it's legal in america in america you have a first amendment right to associate with other people anonymously okay and so your donation to coin center is your way of expressing that associational right the government doesn't have any business knowing precisely who all our donors are because that's exactly how they target suspect political organizations that they want to quash so donate anonymously it's also good

David Hoffman:
[1:17:17] Practice for the listener just to engage in privacy technology.

Peter Van Valkenburgh:
[1:17:21] There's another benefit too. And David, you know this because you were our co-paintiff in the lawsuit challenging the Tornado Cash sanctions. Because we received donations using Tornado Cash, we had standing to challenge the sanctioning of Tornado Cash contracts because we're like, no, we want to keep using Tornado Cash to receive donations. And by the way, that's a First Amendment associational right. So give to us using some weird Ethereum-based privacy tool. And then we'll have standing to defend that tool if they ever come forward in the future.

David Hoffman:
[1:17:51] To defend that tool and normalize that tool so privacy can be normalized in society as much as possible. Peter, David, thank you guys for coming on and just doing the Lord's work, just defending Roman, reporting on privacy in America, and making sure we have the freedom to use these bankless tools.

Peter Van Valkenburgh:
[1:18:09] Thanks, guys. It's been great.

David Morris:
[1:18:10] Thank y'all for having us on.

Ryan Sean Adams:
[1:18:11] Thank you.

David Hoffman:
[1:18:13] Bankless Nation, you guys know the deal. Crypto is risky. Somebody might try and take you to court. We don't want that. But we got people like Coin Center. We got people like David on our side, which makes me feel very good. Nonetheless, you can lose what you put in. We are head west. It's not for everyone, but we are glad you are with us on the Bankless Journey. Thanks a lot.

Music:
[1:18:39] Music