- Ethereum Foundation and Paradigm fund legal defenses, stressing that prosecuting developers threaten privacy and innovation.
- Legal experts warn that charging developers for writing privacy software sets a dangerous precedent for open-source coding.
- Paradigm hires blockchain investigator ZachXBT, highlighting rising cyber threats and the need for stronger Web3 security.
The Ethereum Foundation has announced on X a $1.25 million donation toward the legal defense of Alexey Pertsev, emphasizing that privacy is a fundamental right. Pertsev, a Tornado Cash developer, faces prosecution for writing open-source code that enables private crypto transactions. Similarly, Paradigm, a prominent venture capital firm, has pledged $1.25 million to support Roman Storm’s legal battle.
Crypto Developers Face Unprecedented Legal Challenges
Tornado Cash co-founder Roman Storm faces charges that may land him in prison for 45 years. He is accused of conspiring to commit money laundering, evading sanctions, and running an unregistered money-transmitting business. Many contend, however, that rather than focusing on malicious actors abusing the technology, these accusations penalize the act of creating privacy-focused software.
Legal experts argue that prosecuting developers for code creation sets a dangerous precedent. Keri Axel of Waymaker LLP, Storm’s legal counsel, stated that this case threatens software development itself. Moreover, developers hesitate to release new privacy-focused software due to legal uncertainties.
Legal and Industry Reactions Intensify
The Tornado Cash scandal has sparked a number of briefs supporting the defense of Storm. Some of the groups that have come in to defend include the DeFi Education Fund, Coin Center, and Blockchain Association, arguing that holding developers of software liable rather than bad actors would stifle innovation. A 5th Circuit Court court ruling also determined sanctions against Tornado Cash to be unlawful, which was rejected by the Department of Justice.
The accusations were questioned by American politician and businessman Vivek Ramaswamy, who said that rather than developers, the focus of legal action should be on individuals who violate current laws. The situation is further complicated by legal experts who point out discrepancies in the way government authorities have interpreted the 1960 accusation pertaining to unauthorized money-transmitting enterprises.
Paradigm Strengthens Cybersecurity Amid Growing Threats
ZachXBT, a blockchain investigator, was recently employed by the firm as an incident response advisor in addition to the legal battle. This action coincides with an increase in cyber threats since Bybit was recently the target of one of the worst cybersecurity breaches in cryptocurrency history.
By improving security across all of its portfolio companies, Paradigm hopes to give developers and investors a safer online environment in which to operate. As a result, cybersecurity risks and governmental scrutiny continue to influence how cryptocurrency is developed in the future.
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