NEW YORK — Prosecutors advised a federal choose in open courtroom on Friday that they had been contemplating criminally charging sure workers of crypto enterprise capital agency Dragonfly Capital, together with common accomplice Tom Schmidt, for his or her 2020 funding into privateness device Twister Money.
The dialogue between prosecutor Nathan Rehn and District Choose Katherine Polk Failla of the Southern District of New York (SDNY) got here amid a break within the ongoing trial of Tornado Cash developer Roman Storm, who has been charged with conspiracy to commit cash laundering, conspiracy to function an unlicensed cash transmitting enterprise and conspiracy to violate worldwide sanctions for his work with the privateness device — prices for which, if discovered responsible, he faces as much as 45 years in jail.
During their case, the prosecution launched a slew of messages between Storm and two Dragonfly Capital companions, Schmidt and managing accomplice Haseeb Qureshi. Within the context of the federal government’s case, the messages appeared to serve a number of functions: to ascertain correct venue in New York (as a result of Schmidt is predicated in Manhattan), to indicate that Storm and his colleagues profited from Twister Money and to indicate that they made frequent adjustments to the entrance finish, or consumer interface, of the product.
Nonetheless, when Storm’s protection workforce raised the potential of asking Schmidt to testify — doubtless to supply context for his and Storm’s messages and to clarify the agency’s rationale for investing in Twister Money — prosecutors declined to grant Schmidt (in addition to probably one other of the protection’s would-be witnesses) immunity from his testimony getting used towards him in a future prosecution, prompting Schmidt to plead the fifth and decline to testify in Storm’s protection.
“Are you presumably prosecuting everybody at Dragonfly?” Failla requested Rehn on Friday.
“Not everybody, however Schmidt” and one other particular person, Rehn stated, according to Inner City Press.
The federal government then requested the choose to seal that portion of the transcript of the open-court dialogue, which she agreed to do.
Qureshi took to X on Friday to defend his agency’s funding in Twister Money, writing:
“We imagine deeply in People’ proper to privateness, and the shortage of it stays one among crypto’s largest unsolved issues. We subsequently stand by our funding. We didn’t function or train any management over Twister Money, we had no contact with any malicious customers, we at all times inspired our portfolio firms to comply with the legislation, and we keep that Twister Money itself has a lawful proper to exist,” Qureshi wrote. “Charging a enterprise agency for a portfolio firm’s alleged misconduct can be unprecedented, particularly below these circumstances.”
Qureshi added that Dragonfly has “absolutely cooperated” with the federal government’s investigation into Twister Money, which he stated started in 2023.
“In spite of everything of this time — years later — bringing prices towards Dragonfly can be outrageous, opposite to the information, and would induce a chilling impact onto all funding into crypto and privacy-preserving applied sciences in America,” Qureshi stated. “We don’t imagine the DOJ would truly carry such absurd and groundless prices. But when they do, we intend to vigorously defend ourselves.”