“Eindhoven”, image by Metro Centric, shared via flickr.com-. License: CC BY 2.0 Deed

The trial of Tornado Cash developer Alexej Pertsev took place at the East Brabant District Court. The verdict goes far beyond the case, as it sets an example of the shared responsibility of software developers.

If you don’t hold coins, you don’t take on any guilt; Software is a tool, and those who develop it are not responsible for what others do with it. These are the principles on which the legal understanding of the crypto scene has been based – so far. Because it looks like it’s time to question these principles.

At least the East Brabant District Court in Eindhoven has held one of Tornado Cash’s developers, Alexej Pertsev, responsible for what happened to his software.

Tornado Cash is a system of smart contracts on Ethereum that relatively elegantly allows tokens to be anonymized on the blockchain. Numerous coins and tokens were laundered via Tornado Cash, in many cases in connection with DeFi hacks, in some cases also with hackers from North Korea. Almost two years ago, the developers of Tornado Cash were arrested and the addresses of the smart contracts – which remain active – were sanctioned.

The court cases against the developers, which are taking place in the USA and the Netherlands, are exciting because they not only speak law, but also create law. Since Tornado Cash is a system of smart contracts, there is essentially no operator; the smart contracts can no longer be changed because the developers have switched off the corresponding function after a trial period; the few remaining opportunities to exert influence have been handed over to a decentralized autonomous organization (DAO). The developers had no way of preventing hackers from laundering coins via Tornado Cash. How can they then be held legally responsible for this?

You can, judges the court in East Brabant. It starts with the Dutch legal principle that “an intermediary who provides communications services to transmit data will not be convicted if his services are misused for criminal purposes” – but under one condition: if he follows a court request, “immediately take all measures that can be expected to no longer make the data accessible.” This jurisprudence, according to the court, “is specifically designed to support freedom of expression.” Because if an intermediary can escape responsibility for criminal data by blocking it, “there is no obligation to engage in preventive censorship.”

A blockchain that does not allow data deletion and smart contracts that cannot be changed are obviously a problem in this model. The carte blanche for service providers becomes questionable. There is no way to instruct the suspect to delete certain data, which is why Pertsev, according to the court, “cannot be considered an intermediary as defined in criminal law”, which means that “the basis for the exemption from criminal liability” is missing. The defendant, like the other developers, as the inventor of Tornado Cash, is “responsible for the consequences of the operation of the tool. The autonomous, immutable and unstoppable nature of smart contracts is no excuse in this context. They are the result of a conscious decision by the designers.”

In addition, the developers of Tornado Cash were well aware that their invention was used to launder money. Around 30 percent of deposits into the onchain mixer are proven to come from a criminal source. However, this “did not prevent the defendant from further developing Tornado Cash.” Until his arrest, he even worked on “improving the privacy that Tornado Cash offers. There was never a point where he no longer wanted to be associated with Tornado Cash. “The defendant accepted the easy, unlimited, foreseeable and obvious criminal use of Tornado Cash” – and also benefited from it through the TON tokens.

For these reasons, the court finds Alexei Pertsev guilty of facilitating the money laundering of 535,809 Ether – approximately $1.2 billion – and sentences him to 64 months in prison.

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Source: https://bitcoinblog.de/2024/05/17/niederlaendisches-gericht-verurteilt-tornado-cash-entwickler-zu-64-monaten-gefaengnis/

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