🌩️ Eye of the Storm

Gm!

We have a special guest joining us for this morning’s Empire. My colleague Ben Strack, who writes our Forward Guidance newsletter, has spent the last two days in court observing the Roman Storm trial. 

As we’ve previously mentioned, this trial has high stakes that could have ripple effects not only for crypto but for tech in general. 

But I don’t want to repeat what you already know. Instead, let’s have Strack take you behind the scenes (or gavel, if you will).

🧑‍⚖️ Inside the courtroom

The US government expects to rest its case against Tornado Cash co-founder Roman Storm today following yesterday’s anticipated testimony from an expert witness.

IRS Criminal Investigation special agent Stephan George shared findings yesterday that appeared to link a portion of the funds stolen from Hanfeng Lin to Tornado Cash — the so-called crypto mixer used for transaction privacy that this case centers around.

Lin testified last week that a fraud recovery service told her to contact Tornado Cash about retrieving her funds. The defense was reportedly considering a mistrial motion after a subsequent witness, FBI Special Agent Joel DeCapua, didn’t link Lin’s funds to Tornado Cash — putting the relevance of Lin’s testimony in question.

But George connected Lin’s funds to Tornado Cash via an accounting method known as Last In, First Out (LIFO) — an analysis challenged by defense attorney Keri Axel during cross-examination. George defended LIFO as a generally accepted accounting principle that the IRS “respects.” 

While the possibility of a mistrial was briefly mentioned in court on Tuesday, the defense did not immediately comment on whether that’s still being considered. 

"It's usually not the situation that a trial is declared a mistrial merely because a witness's testimony is not entirely germane,” ex-Crypto Lawyers LLC partner Patrick Gruhn told Blockworks. “Courts generally expect a lot more — egregious misconduct or prejudicial facts against the jury — before they suspend a trial.”

Though George linking Lin’s funds to Tornado Cash was an attempt by prosecutors to clear up a point of contention that arose, the charges against Storm — conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money transmitting business — go well beyond that. 

As Axel asserted in her opening statement: “It’s not a crime to make a useful thing that is misused.”

I’ve been sitting 20 or so feet from Storm over the last two days, even passing him during breaks en route to the bathroom or elsewhere. He appears calm, but walks with pace.

Sitting next to Axel on the courtroom’s left side, Storm often gazes toward the stand, judge and jury stone-faced, blinking infrequently behind red-framed glasses. Occasionally, he will scribble something on a Post-It and hand it to a member of his defense team. I have yet to see him roll his eyes or shake his head. 

Trial attendance ranged from roughly a dozen to two dozen people on Tuesday and Wednesday — meaning there are plenty of empty seats. While not as high-profile as the Sam Bankman-Fried trial, that doesn’t mean the stakes aren’t high. 

“A conviction could set a dangerous precedent by criminalizing the act of writing and publishing open-source code, amplifying fears among US developers and pushing innovation offshore,” Blockchain Association legal head Marisa Coppel told me. “An acquittal, by contrast, may reaffirm that software creation alone isn’t a crime and could help restore confidence in building decentralized tools.”

Though the defense continues to finalize its slate of witnesses, Storm’s attorneys said they could rest their case as soon as Monday. Storm has not yet decided whether he will take the stand, they added.

So it appears likely we’ll have an outcome next week. To read my full piece (detailing more witness testimony) and to monitor future trial updates, keep an eye on our Roman Storm coverage.  

— Ben Strack

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📅 October 13-15 | London

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• Tim Draper raised $200 million for his eighth fund, which is notably higher than the $124 million he raised for his seventh fund. 

• Tether doesn’t want to feel left out and is looking to do business in the US, Bloomberg reported.