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Unraveling Tornado Cash's Tumult: Beyond Code, Business Conduct Faces Scrutiny

Amidst cries of a war on open-source, the US government's charges against Tornado Cash founders reveal a deeper narrative. It’s not about the code; it’s the centralized business operations under scrutiny.

So the US government charged two Tornado Cash founders with a range of crimes and arrested one of them. Another developer was arrested in the Netherlands just over a year ago in what we now know was the beginning a long legal saga around the protocol. Many in the crypto community have long complained that this constitutes some sort of war on open-source code.

In April we expressed a different view: that much of Tornado Cash was in fact operated as a set of centralized services under the control of entrepreneurs who might, incidentally, also be software developers.

SDNY Prosecutors, at least, agree with the later view. Tornado Cash's founders are not charged with writing software – they are charged with operating centralized, profit-driven enterprises that violated the law. The government's position with respect to crypto mixers/tumblers was made clear in May 2019 when FinCEN published this guidance:

The first lesson here is that the government is not trying to prosecute them for writing code. Nothing in the document talks about developing privacy technology as a problem. Nothing they are charged for was decentralized at the time the actionable conduct occurred. Everything is about operating centralized businesses that conflict laws that were known at the time. Whether what they did was illegal is a separate question to be settled within the legal system. But nothing in the document looks like an attempt to prosecute developers for writing and publishing code.

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