Software Development Isn't a Crime: Coin Center on the Fight With the DOJ | Michael Lewellen |

[Music] hello up next we have Michael from blockade and Peter from coin Center to talk about why software development is not a crime and coin centers fight with the doj enjoy thank you hello eth Denver so um my name is Peter Van valkenberg I'm the executive director of coin Center coin Center is a an independent nonprofit research and advocacy group based in Washington DC and for the last 10 years we've been a a voice to educate and Advocate about these Technologies in Washington DC with congress with the agencies and increasingly lately we've also been bringing impact litigation uh we've been suing the government we sued over the tornado cach designations that case is um coin Center V Yellen in the 11th circuit we sued over the 605i reporting requirement that case is Carmen vellen along with coin Center the 650i requirement is uh if you receive 10K more in crypto you have to know the social security number of the person who paid you we think that's unconstitutional search and surveillance and we're also supporting the Joshua Jarrett lawsuit where he's arguing that block rewards should be taxed when they're sold not when they're received through staking or mining we're also supporting another lawsuit which is why Michael Luellen and I are here to talk to you today so Michael lellan is a respected and longtime um recognized security expert a smart contract security expert formerly at open Zeppelin and now at blockade he's also a coin Center fellow um who helped us with some important research which we'll get to as we talk later today um and he is the plaintiff in a lawsuit against the Department of Justice for their interpretation of the unlicensed money transmission laws which are the prosecutions they're bringing against Roman storm and against the developers of the Samurai wallet in the southern District of New York so Michael I wanted to start um just to talk about your background sort of what first got you into this space and what's some of the work you did over the years before um the lead up to this particular litigation that we'll talk about awesome um so I started I always like to start out with I started mining Bitcoin in 2012 on some school computers that no one was using at the time this is before as6 just took the game came away um so that got me into the whole thing of like okay now I have to figure out what this thing is that I've suddenly mined from a computer and created out of thin air um I started to explore it got into Consulting uh got really interested in the Dallas Fort Worth area where I grew up in like kind of going to meetups and educating people and doing consulting and then eventually I got my computer science degree I got more into smart contracts as ethereum launched and so I got to do a lot of really cool Consulting projects with Thompson Reuters Toyota Verizon uh and then the last four years up until recently was working at open Zepp and where we got to work on a lot of smart contract security audits uh building secure governance systems working on access control uh you know trying to figure out how to keep Dows secure for themselves in some cases uh and topical for right now yeah yeah yeah yeah and then uh and then yeah up until recently moved to blockade to continue to do uh cyber security work in the field yeah so I I sometimes tell people that Michael Liv lived the life I I wish I lived in 2011 or 12 I was faced with this moment one evening when I was living in a small apartment in New York City where I was thinking like should I try to install the Bitcoin client and start mining or should I study for my contracts exam at law school and I chose the contracts exam at law school but our paths diverg there it might have been good for you but the industry is better off uh since you took that second path that's very kind that's very so um in between uh when you when you were you know uh leaving your job at open Zeppelin and about to start your new job you started working on a software project yep uh a project that coin Center among others would greatly benefit from why don't you tell us about feros um this protocol that you've developed and um and so just so we get an idea of what led to this lawsuit ultimately yeah so uh a lot of people in the industry have always talked about like how cool smart contracts are for having like conditional rules the ability to do interesting raising projects um but you never saw a lot of use cases that I think like dumped it down to some simple terms and there there are good fundraising projects out there but um I wanted to build a protocol that was just very simple it was just I want to put my I want to let someone raise money they want to hit a certain Milestone and we want to give the people funding that project the a guarantee that if the fundraising goal is not met then the funds will be returned it's very simple there's really no bells and whistles the idea is to do that in a very simple process there's no like dependencies there's no like bells and whistles it just does that so it's kind of like Kickstarter but non-custodial right exactly yeah it's essentially a non-custodial Kickstarter built very simply on the ethereum blockchain and something that um we had talked about before and in general was donor privacy because when coin Center decided to sue the um ofac treasury on the tornado cash sanctions the reason we had standing to Sue was because the sanctions forbid us from receiving donations using the tornado C smart contracts because those were now sanctioned smart contracts and coin Center is a entirely legitimate legally Incorporated nonprofit in the United States we're political advocacy organization so you have a First Amendment right to to donate to our cause to associate with us politically and actually to do it privately but a lot of onchain fundraising tools don't have these privacy features so one thing that um because Michael and I have talked about these things for a long time we said is like well wouldn't it be cool if you could have a non-custodial Kickstarter that was also good at protecting donor privacy so that's an another aspect of the protocol that I was really excited when I first heard about Michael working on it but sadly um for us who want to use this protocol and for Michael who would like to publish this protocol and for anyone else who would benefit from this protocol you are not yet publishing this protocol um let's shift before we get to why to tornado cach so Michael and I actually were um together at zcon when the sanctions on the tornado cache were announced it was one of the few in-person zons the zcash conference um and it was in Las Vegas and M Michael why don't you you tell the story from your perspective actually of when I went to find you and why yeah I mean I remember we're in the middle of one of the most privacy Centric crypto conferences uh that that occur and you know when the tornado s tornado cach sanctions came down it was like uh you know basically throwing a rock at a hornet nest everyone was very concerned and everyone was asking Peter so Peter what does this mean you have a talk later today you'll surely cover this um yeah Jack Jack gavigan of the foundation was like Peter you'll give an emergency address right and I was like look there's a lot of hard questions here and I'm not an expert in smart contracts I need to know what's actually been sanctioned by ofac so yeah so I I took a quick look and and here it wasn't just like what is sanctioned but also like how much of this immutable there's a dow there's a token there's all this like stuff moving around uh like are we talking about a protocol that is like legitimately decentralized um which like spoiler alert it is um there's a more complex answer which is why we had to write like I don't even know how many pages it would be but a very long explainer later but like yeah the part of tornado cach is immutable and decentralized and doesn't have no one has custodial control of funds and Michael's modest like within an hour he had a detailed spreadsheet for me of which of the actual contract addresses were immutable which of the contract addresses might be controlled or in some ways um accessible to the Dow as they change things and that analysis was really the foundation of what ultimately went into the two lawsuits coin Center lawsuit against against uh Treasury and the vanloon plaintiff's lawsuit against treasury saying look you don't have statutory authority to sanction an immutable smart contract because ofac has the authority from Congress to sanction a person a foreign person or the property of a foreign person and an immutable smart contract which the tornado cash pools are is neither the property of a person nor a person itself it's something out there in the wild that is actually inaccess to any person and doesn't and Michael helped to confirm this very quickly benefit any sanctioned person or foreign person so it's actually outside of ofx jurisdiction to add those addresses to the specially designated nationalist list I mean yeah and this legal reasoning and this technical uh understanding of the onchain mechanics is what ultimately led to the uh the victory of Van LOM the plaintiffs in the fifth circuit where the fifth Circuit Court of Appeals said yep you're right ofac doesn't have the statutory authority to sanction those addresses and we're still waiting for a remedy in that case but hopefully within a few months the court will say we're invalidating those sanctions Nationwide Americans are free to use the immutable pools again so thank you Michael for that work a few um actually almost a year after the sanctions were announced there was another announcement which was that the doj was pursuing criminal um criminal uh charges against Roman storm one of the developers of the tornado Cash Smart contracts the sanctions in general the prosecution of Roman storm also the prosecution of Alexi perzov in the Netherlands as a developer in this space working on these projects working on things like pharoh what are these prosec do uh to your state of mind to your desire to actually continue to work in this space the way you want to work in this space it ramps up the Terr considerably I mean the last week most developers are usually like more scared of North Korea than the US federal government but like during those times seeing those prosecutions there's generally a question of like which one should I be more terrified of um and it was primly because it just wasn't clear I mean prior to that like it seemed pretty clear that if you didn't have custodial control of funds like you weren't a money transmitter because the whole idea of transmitting money is that you yourself have it and move it to somewhere else and so the the fact that that was now open an open question and it was just a question of like supposedly just whether the doj likes you or not or considers like what you're doing to be like criminal and therefore like you know basically someone else is using your tool to do criminal acing whether you're liable for it yeah um I mean that's that's a big open problem that like a lot of developers had to question so obviously I'm questioning that like I'd love to build a protocol but if someone just sends money to it or uses it in a way uh that could be connected to criminal activity and I'm I'm suddenly liable um even publishing the code like I mean even though I would hope this it never gets to this point but like the tornado cache code got taken down from GitHub for a while just just out of fear uh that the simply publishing the code would be a problem which is why I haven't yet published the pharaoh's code as much as I would love to and I'm uh and get feedback from people and probably get more third party review before I I deploy it and actually have people use it uh like just publishing it would be a concern because I don't know if the liability is going to come back on me because there's this massive can of worms out there that hasn't been like clarified of like am I a criminal for giving someone the ability to move money uh in a way that I have no control over yeah and I think that's the I think that's the right legal analysis unfortunately if you look at the briefings in the tornado cash prosecutions and the samurai wallet prosecutions you don't find a nuanced interpretation of the licensed money transmission laws where they say well look if you if you knowingly move money for North Korea you're going to jail like that that would be a reasonable prosecution I think if you knowingly move money for North Korea instead they say if you're doing money transmission which we Define as any facilitation of the movement of funds on chain and you don't have a license for doing money transmission then you are effectively strictly liable for a federal felony and so that's a a wildly dangerous interpretation of the criminal law but they've been abundantly clear that that is their interpretation of the criminal law and so I don't blame you like if I was a software developer I also would not want to publish things that might facilitate the movement of funds on chain right now because I don't want to end up in federal prison and if it's not clear like this is like applying to almost every Booth that's over in the room where a lot of people have sponsored here at eth Denver it applies to the people that are building I mean heck uh for a while the treasury was listing test net contracts under their ofac list which I feel like this is like pretty wild and would probably never happen but the fact that like they didn't even understand that these test net contracts were not being used to move actual criminal funds because they're test net they're not none of the funds are actually worth anything but like is there a scenario where the government could interpret the law and tell someone that like just by you know allowing money and transmission to occur even if the money is not real like I just it it just opens so many can of worms or I'm like where does a liability end it doesn't seem to have a clear line and so that's why I think Michael is a hero for deciding to stand up and actually you know nobody wants to stand up in that environment because it's it's it's not a pleasant experience to bring a lawsuit against the Department of Justice they're pretty expert in lawsuits so you better be serious about your challenge and Michael really is which is why coin Center was 100% on board with supporting his his challenge so Michael's challenge is Luellen V Garland um because it was brought at the very end of the Biden Administration against the former Attorney General Garland and um I think it's a great name I think it sounds like something out of like a 1920s Noir film or something yeah lell and V Garland but the challenge the challenge is really important as much as I joke about the name it says basically three things um it says look the doj is outside of its statutory Authority when it's bringing these prosecutions and their statuto statutory Authority should not require Michael to go get a license or registration before publishing his protocol and maintaining a website for his protocol it says that if it is in the statutory Authority for them to bring these prosecutions then we have a massive due process constitutional deficiency here because then the federal regulator for licensing and registering money transmitters and doing AML kyc actually said clearly in 2019 that non-custodial developers don't have to get a license so you've got one part of the government saying one thing and the other saying something contradictory that's a due process problem people should be aware of their obligations before they end up on the wrong side of a prosecution and third it says that if there is statutory authority to bring this prosecution it violates the first First Amendment because Michael is at root a sci a scientific researcher a developer of new tools for new ways of human flourishing of making donations to political advocacy groups of work like this and if America is not going to be a welcoming home for people like that then we've abandoned all of our first amendment principles so um Michael I'll let you have the the last word if you want if you want one uh I hope that the future uh brings honestly Good Fortune to not just this case but everyone who's building in the space and uh you know we've got a new Administration and there's kind of a new energy in the air uh but we're still not quite sure where it's going we just have hopes and uh I I hope that like both not just my lawsuit but anyone like we've seen a lot of lawsuits now that are being closed out with the federal government I don't know what that means for mine necessarily it's a different part of the government but um I'm very hopeful and uh in if not then it's just going to be a long fight that hopefully means that other people can build safely and so the sooner we get that the better and yeah I want America to be the place where people feel comfortable building not the other way around so join me in thanking Michael Len for his bravery and um that's it for us but we do have one more thing in the vein of a good Tech conference I'm very happy to Welcome to the stage Brian kleene who is also a hero in this space Brian is Roman Storm's defense attorney in his incredibly important defense of the prosecution for unlicensed money transmission among other charges in the southern district of New York so please welcome to the stage Brian Klein nice to see everybody here thank you Peter thank you Michael and thank you for the good fight you're putting up um I just want to say hi real quick for myself but also my client wanted to say hi to everybody here at eth Denver and so they're going to play a short video he typically would come to this conference but cannot now so I think they're going to start this video now hi everyone I'm Roman storm co-founder of tornado cach I hope you're all having a great time in Denver this year as many of you probably know due to the ongoing defense of my case in southern district of New York I sadly cannot be with you all in person this year if dander has been my home since 2018 I've always loved meeting and talking to various people Founders Builders hackaton participants I believe it's a very magical place and it's a very very special place to me and it's great to see how this community keeps evolving despite all the obstacles that we Face together I just wanted to join you briefly to say that I really miss everyone and I'm very thankful and grateful for all the support I received from this awesome Community it allowed my defense team to turn over every stone in defending me and it's been overwhelming and it has kept my spirits up we will never give up the fight and I wanted to ask you please folks keep building and remember privacy is not a privilege it's all right thank you yes thank you everybody who's been so supportive of Roman and the effort and the fight we're having trial starts mid April and um please keep up the support thank you