The long-awaited trial of Alexey Pertsev, held Tuesday in the Netherlands, offered a few clues to how prosecutors will take their case against the Tornado Cash developer forward – including detailing what he is being charged with doing.
Pertsev, who contributed code to the crypto anonymizer, has been in jail since August, days after the U.S. Treasury Department sanctioned the decentralized protocol, which it said had been used to process dirty money by North Korean hackers.
Tuesday’s pro forma hearing decided that Pertsev must remain detained until at least February – and also offered, for the first time, a clear statement of charges against the developer.
But it also gave a hint about what the case will and won’t do. In the U.S., the Tornado Cash issue is often talked about in terms of the Constitution – which the U.S. Supreme Court has said includes the right to publish computer code.
In Europe, there’s no equivalent legal doctrine. Lawyers in the case don’t seem to be making any appeal to the free speech provisions of the European Convention on Human Rights, and it looks more like the trial will instead get deep into the mechanics of how decentralized finance (DeFi) works in practice.
If so, the proceedings may do little to resolve more general questions – such as the fear many developers have that they could now be held responsible for the open-source software they develop.
Here are some of the things we learned, beyond the initial headlines.
There are other suspects
Prosecutor Martine Boerlage mentioned Pertsev’s name frequently with co-developers Roman Semenov and Roman Storm as she attempted to paint a picture of a service that was under their joint control.
“The defendant sits along with Semenov and Storm in the driver’s seat and determines what does or does not happen within Tornado Cash,” Boerlage said, citing evidence taken from group chats on Pertsev’s phone. (A written version of Boerlage’s speaking note seen by CoinDesk refers to the two as “S. and S.”)
Separately, the prosecutor said that other suspects are also being investigated alongside Pertsev, but on a different track, given the complexity of pursuing those not on Dutch territory. Contacted by CoinDesk, the public prosecutor’s office declined to confirm whether Semenov and Storm are among those under investigation.
When previously contacted by CoinDesk several weeks ago, Semenov told CoinDesk he was not ready to give public statements on the case, and did not immediately respond to a further request for information made after the trial. Storm invited CoinDesk to contact his lawyers, but did not say who they are.
The case will get into the guts of DeFi
Dutch law makes it illegal to conceal or disguise the origin and movement of funds, and prosecutors said Tornado was used to place almost 75% of all crime-related crypto on the Ethereum blockchain.
To prove that Pertsev is somehow responsible for this activity, prosecutors will have to refute the conventional wisdom that Tornado Cash runs autonomously, meaning it is not under anyone’s control.
Boerlage said records of internal conversations show Pertsev, Semenov and Storm ran Tornado like a business, discussing management and operational decisions, and that they could, in practice, outvote other holders of the protocol’s TORN tokens. In particular, she said, they could have chosen to impose better laundering checks but doing so would have driven away too many clients.
She said she’s still working to decipher exactly how Tornado’s governance works, and to prove that Pertsev profited from funds that passed through the protocol.
“We have found large sums of money and cryptos in the name of the suspect in various places around the world,” Boerlage said. She added Pertsev “couldn’t have afforded his rented house and expensive Porsche” with wages from his job at cybersecurity company PepperSec alone.
Pertsev’s lawyers deny the charges, which they say are vague and don’t specify when, why or how the supposed money laundering happened. They also said the prosecutor is confused about how decentralized finance works.
Pertsev’s team will be seeking to show this case is different from existing case law on bitcoin mixers, the lawyers said. That will require a deep dive into how projects like Tornado Cash are governed, such as – for example – that the protocol can be used with multiple user interfaces, not just those supplied by Pertsev.
“It's clear to us that these judges are not as familiar with the subject matter [of how crypto works] as they should be,” Pertsev’s lawyer Keith Cheng told CoinDesk outside the courtroom.
Ultimately, the hearing was not substantive but procedural to decide whether Pertsev should remain in custody pending a full trial. As Cheng put it, the hearing is about “deprivation of pretty much the greatest asset we know in our society, which is our personal freedom.”
Pertsev has been in jail since August without fully knowing the charges against him. His counsel alleges details and documents have been withheld.
The hearing was a reminder of the great personal cost of being held, uncharged, in jail. Pertsev and his wife Xenia Malik have previously told CoinDesk they are permitted just a single, supervised, one-hour meeting per week. He was planning a trip to Disneyland with his kid sister when he was arrested, the court was told.
In the courtroom, Malik wept as she observed the case being made against her husband. With judges deeming he could try to flee the country or hide evidence if freed, the couple now face a Christmas apart.
Some quotes have been translated from Dutch.
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