Storm Clouds Ahead: Why Tornado Cash Developers Need Your Support | Ameen Soleimani - MolochDAO

oh hey cool just in time all right got is this G to work oh okay I'll figure that out later uh so yeah um this talk is called storm clouds ahead why the tornado cach developers need your support I'm Amin Solani Summoner of mikow thank you for joining us now could I get a show of hands who here has heard of tornado cash everyone keep your hands up if you've also aware of the legal actions facing Alexi and Roman and keep your hands up if you believe that open source developers should be held criminally liable for the crimes of foreign terrorists there are some rooms in which there would still be a lot of hands up I'm glad this is not one of them so the Tornado cach Story uh it was a privacy protocol used to generate fresh wallets because eth nerds were actually jealous of zcash and their private money infrastructure and we wanted to avoid revealing our balances and transaction history with every single payment mikd funded the initial development in 2019 it was an of of an open-source privacy protocol to protect the security of ethereum users and it was the second ZK snarks deployment in human history after zcash there was a thousand person plus trusted setup ceremony and not many people know this but the tornado cach team was actually rejected in the final round there was two teams uh by the by mikd to get the initial Grant to build it and they were so mad that they built the entire thing in 3 weeks anyway and then mik da was able to reward them with a retroactive Grant and paid for the rest of the open source development in terms of audits and and stuff and we used it for our personal privacy I used it for payroll and vitalic always the hero used it to donate money to support Ukraine everything was going fine until uh North Korea allegedly hacked axi Infiniti a video game for $600 million why a video game had $600 million I don't know subject for a different talk but this was not good uh because after they hacked axi infinti for $600 million those hackers started depositing hundreds of millions of those hack proceeds into tornado cash and on August 8th 2022 ofac sanctioned the tornado cash contracts and you can see that in their official statement which is still there on the treasury website they say that $7 billion was laundered they have no interest in uh uh differentiating between legitimate and illegitimate uh uses of the protocol so the legal action against Alexi 2 days after the sanctions on August 10th 2022 Alexi was arrested in the Netherlands he was held without bail for 9 months and he was finally released on bail in April of 2023 he's been charged with laundering over 500,000 ether which according to the authorities he should have suspected was of criminal origin Alexi has denied these charges his trial starts in less than one month on March 26th I plan to be there the outcome of his trial will have an impact on Romans trial as well and we're grateful for the support of the Amsterdam uh privacy Community who came out to rally for Alexi and you can see the signs say open source not a crime privacy is not a crime and so then we have the legal action against Roman so one year after Alexis's arrest on August 23rd 2023 Roman storm was arrested at his home at gunpoint in front of his three-year-old daughter and the FBI director Christopher a ray in His official Department of Justice uh post on that day said today's announcement should remind criminal organizations everywhere in the world that they are neither untraceable nor Anonymous you can't hide from us behind a keyboard whether you're a hacker or facilitator the awkward part of this is that Roman was not hiding he was cooperating with the investigation when he was arrested and beyond that all of the code for this project was publicly available on GitHub and the updates were all posted to Twitter so if the government didn't like it why didn't they send a request Roman storm is charged with one count of conspiracy to commit money laundering one count of conspiracy to violate us sanctions and conspiracy to operate an unlicensed money transmitting business he could face a total of up to 25 years in prison he was released on bail and pled not guilty and his trial starts September 23rd in New York City I plan to be there as well uh I do have a video that Roman prepared for his legal defense fundraiser we'll see if this doesn't look like it's carrying over but uh mirror displays oh is the sound going to work can we get the sound on this it's just Roman's face uh all right I'm going to come back to this maybe at the end uh since we're having technical difficulties anyway oh god um so Roman basically explains that uh his case is going to impact all of us and that he was cooperating with the investigation when he was arrested at gunpoint uh at his house at 6:00 a.m. in front of his three-year-old daughter and that uh he needs all of our help as much as we can afford to to help out and so some friends and I helped set up justice Dow to support the legal defense fundraiser mik Dow uh donated its remaining funds nosis donated as well and last month we kicked off a fundraiser on Juicebox which successfully raised over $1 million from over 750 transactions we are still short of our goal of $1.5 million and so if you are inclined and have the means please donate there's a link there and please follow free Alexi Roman on the Twitter I'd like to give some thanks to people who've supported so far uh first off Edward Snowden who Amplified the fundraiser which was a big help and uh I agree that privacy is not a crime and I'd also like to thank some of the major donors we've got matter labs uh thank you matter Labs thank you nouns Dow jpow doeth vital. eth n2.

eth coppelman doeth bgd labs. eth and over 750 others who donated what they could oh okay cool I have an ox cable now which side is this come back to this in a sec so uh I'd like to talk about why the tornado cach devs deserve support and three main points I'll go over are the tornado cach compliance tool that the devs couldn't have stopped anything and that this legal action represents a disproportionate misapplication of the law so the tornado cach developers went out of their way to build a compliance tool this tool allowed users to generate a proof of which deposit belongs to them and this allows users to dox themselves as needed to financial authorities if mandated by Regulators there was a federal reserve report on tornado cach published at the St Louis fed and it explored the trade-off between regulations and privacy it was the best paper on tornado cach I'd read so far and it uh explained or suggested that to regulate effectively that they believe that users should have to provide receipts for which deposit belonged to them to a financial intermediary managed by a regulator it basically mandated the use of the tornado cach compliance tool that they built and they conclude in that report crypto asset mixers such as tornado cash may become an integral part of public blockchain infrastructure they understood the value of privacy and the dangers of financial data honeypots and I have one personal nitpick to add here and that's that uh it's not a mixer uh if it was a mixer you wouldn't be able to prove that what your deposit belonged to you specifically and if ofac had a problem with the compliance tool that the St Louis Federal Reserve recommended using they could have just talked to the team about it so the next point is that the devs couldn't have stopped anything in the same Department of Justice post on the day of Roman's arrest Assistant Attorney General ma uh Assistant Attorney General Matthew G Olsen said as stated in the indictment the defendants cryptocurrency service facilitated more than 1 billion in illicit transactions and they knowingly allowed a globally sanctioned cyber crime group to launder hundreds of millions of dollars on behalf of the North Korean regime in addition acting ass Assistant Attorney General Nicole M Argent tii said as alleged the defendants operated tornado cach as a safe haven for criminal actors to obfuscate the trail of funds tied to their criminal activities this is a chart of the eth in tornado cache you can see the top of the second spike is when the sanctions happened and in the month after the sanctions the amount of eth and tornado went from about 250,000 to about 100,000 but in the months in the years and since then the amount of eth is up about 40% to back about 130 40,000 and this is despite us sanctions the devs being arrested the Dao being hacked by a malicious governance proposal and the UI being compromised by the Dow hacker the smart contract is immutable and what that means is that it will continue to operate as programmed until the heat death of the universe or the end of the ethereum blockchain whichever one comes first not even the tornado torn governance system could shut it down uh also it was a non-custodial system uh there was no admin key to freeze deposits if there was that would have been a massive security vulnerability for all of the users including the legitimate ones because if it was hacked then all of the legitimate users could also have their money drained and the smart contract can be accessed from any UI or command line interface there the UI that the tornado cach devs were managing uh actually did go ahead and block addresses using the chainalysis sanctions API but if other people can access it through other uis there's nothing they can really do to stop people from accessing it and so the devs are not the criminals that you are looking for further uh the legal action against them represents a disproportionate misapplication of the law when HSBC laundered $900 million for the cartels no one was criminally charged but when the tornado cash devs wrote some open source code they were crucified so when the HSBC cartel money launer ing happened ofac uh pursued a civil enforcement and the Department of Justice went ahead with a deferred prosecution agreement which resulted only in fines no criminal charges with tornado cach ofac went straight for sanctions and the Department of Justice went straight for criminal indictment and this is despite the finsen guidance that non-custodial privacy tools are not Money Services business notably finsen did not take parallel uh enforcement action as they have in the past the tornado cach developers are fighting for all of us the outcomes of these trials will have far-reaching consequences for eth developers and for users especially those working on privacy tools if they lose they face imprisonment and government overreach holding the protocol developers accountable for the crimes of their users will reach only further like to thank noun Dow in particular and Brennan doeth who submitted a Manifesto along with his yes vote to send the nouns Dow proposal I'm going to read part of this Manifesto we find ourselves at a pivotal juncture in history where our actions and decisions will significantly influence the landscape of Commerce and freedom across our Global Village voices rise in unison advocating for the Liberty to engage in Commerce for the autonomy to innovate without undo hindrance and for the sovereignty to partake in the vast tapestry of global trade These Are Not Mere theoretical Concepts they are the Bedrock upon which we construct our shared economic future let us be clear our resistance is not born out of a disregard for societal governance or governance or societal welfare instead it is rooted in the belief that true economic prosperity flourishes in an environment of freedom and open competition our struggle is not against regulation per se but against the overreach that stifles Innovation creativity and Equitable access to markets thus let us Advance with determination not as adversaries of Regulation but as advocates for balanced and reasonable Frameworks that nurture Innovation and Equitable Commerce let our resistance be a testament to our commitment to economic freedom a beacon for open trade and a Clarion call for the empowerment of all participants in the global market uh thank you Brandon eth uh we turn the manifesto into nfts and you can purchase them and support our cause please follow the the Twitter there um I'd like to also mention privacy pools which is advancing the compliance tools that tornado cach team pioneered with privacy pools users can publicly dissociate from illicit funds and this aligns with the regulatory objectives of isolating the elicit funds while still providing privacy for legitimate users there's a test net that's live on gorle at privacy pools.com you can check it out and it works like this uh you can see the red boxes at the bottom those are the deposits that you don't want to associate with and so when you withdraw from a privacy pool you can provide a proof that says hey I'm not going to tell you which specific deposits I am but I can prove to you that I'm not the illicit money or the you know North Korean hackers or the defi hackers that have deposited we shipped a working demo last e Denver we published a paper with vitalic on privacy pools and compliance we worked with Dr Fabian Shar and his team from the University of Basil the authors of the original tornado cache paper that was published in the St Louis fed and we've been presenting the work at regulatory conferences to educate Regulators about the new opportunities uh that are unlocked by using zero knowledge proofs for compliance mik Dow gave the grants the chainway to build the Privacy pools 2.0 system which we will complete this week and now that the R&D is complete so is my involvement and I am now advising Oxo a company doing compliance monitoring and whitelisting for privacy Pools and More which we'll discuss on the panel after this I'd like to conclude by saying that putting the devs in chains for eternity and feeding their guts to the Eagles won't prevent the zero knowledge proof fire from spreading to humanity the future we want depends on zero knowledge proofs for privacy whether it's freedom from Central Bank digital currencies that are essentially massive surveillance operations or if we just simply want to iterate and make better blockchainbased Democratic institutions where voters cannot be coerced or bribed or put in danger by their votes being public and in the story of Prometheus he's actually rescued by Hercules and so today together we can all be Hercules let's free our Promethean friends who dared to steal the fire of knowledge proofs from the gods on our behalf thank you