Tornado Cash Defense Fund: Arbitrum DAO Proposal Will Be Reworked

Last week, a proposal (since canceled), was submitted to the Arbitrum DAO by community member Joseph Axisa, sparking debate within the DeFi ecosystem. The proposal sought to allocate up to 600,000 ARB tokens from the DAO's treasury to fund the legal defense of Roman Storm and Alexey Pertsev, developers of the controversial crypto mixing service Tornado Cash.

The 'Support for Tornado Cash Developers' Legal Defense' proposal argued that "a robust legal defense is crucial for protecting the developers of open-source privacy tools and upholding user privacy within the DeFi space." Axisa, a lawyer at Axis Advisory, proposed a donation of between 200,000 and 600,000 ARB (valued at around $400,000 to $1.2 million when the proposal was published) to JusticeDAO to support Storm and Pertsev.

However, the proposal quickly garnered opposition from token holders, who feared potential legal risks associated with the large donation. An Arbitrum spokesperson later confirmed that the proposal had been taken down per its author's request. The proposal will reportedly be reworked with the new version published later this week.

Storm announced the launch of JusticeDAO last month, with the legal fund receiving a significant boost following a public endorsement from former NSA whistleblower Edward Snowden. The Tornado Cash founders argue that the charges represent a direct attack on the open-source development community, potentially discouraging future contributions to public projects.

According to its fundraising page, the DAO aims to cover Storm and Pertsev's roughly $100,000 monthly legal expenses. At the time of writing, the legal defense fund had collected over $1.15 million in community donations on Juicebox, a platform facilitating fundraising with cryptocurrencies. Axisa's canceled proposal also suggested transferring the funds via Juicebox.

Dutch authorities apprehended Pertsev in August 2022 on suspicion of involvement in money laundering. According to wewantjusticedao.org, the Dutch Fiscal and Investigation Service (FIOD) alleges Pertsev helped in "concealing criminal financial flows and facilitating money laundering." Storm was arrested by the Federal Bureau of Investigation (FBI) in August 2023 and indicted on three counts: conspiracy to launder money, conspiracy to operate an unlicensed money-transmitting business, and conspiracy to violate the International Economic Emergency Powers Act. The whereabouts of the third co-founder, Roman Semenov, who faces the same charges as Storm, remain unknown. Tornado Cash also faces sanctions from the U.S. Department of the Treasury for alleged involvement in facilitating money laundering by the North Korean hacking group Lazarus. Pertsev and Storm's trials are expected to begin in March and September this year, respectively.

Tornado Cash's founders and their supporters argue the platform is a privacy-focused, decentralized mixing service, not a money transmission service. They claim the developers created software that facilitates anonymous transactions, similar to cash, and should not be held responsible for how users use it. The core argument of the case centers around whether a tool can be deemed inherently criminal solely due to the potential for misuse. Last November, the Blockchain Association publicly voiced its support for Tornado Cash and its founders by condemning OFAC sanctions.

However, a month ago, crowdfunding platform GoFundMe announced it had canceled Pertsev and Storm's funding campaign, which had garnered around $350,000 in donations by the time it was shut down. GoFundMe cited a spurious violation of its terms of service as the reason for shutting down the campaign, suggesting that the fundraiser could potentially expose the platform, its employees, or users to "harm or liability of any type." GoFundMe has not responded to questions over why this particular fundraise was canceled when other similar campaigns were allowed.