TLDR
- DOJ eyes Dragonfly execs as Tornado Cash trial exposes deeper KYC ties
- Dragonfly faces DOJ heat over emails with Tornado Cash developers
- DOJ expands Tornado Cash probe, targets Dragonfly’s KYC discussions
- Tom Schmidt silent as DOJ hints at wider charges in crypto laundering case
- Tornado Cash trial reveals Dragonfly’s early role in KYC evasion talks
Federal prosecutors may file new charges against individuals at crypto VC firm Dragonfly in connection with the Tornado Cash trial. The Department of Justice (DOJ) is examining emails and communications between Dragonfly executives and Tornado Cash developers. The Tornado Cash trial continues to expand, with fresh scrutiny now focused on the firm’s internal discussions around KYC integration.
Dragonfly Under Pressure as DOJ Signals Broader Charges
The Department of Justice has confirmed it is still considering charges against members of Dragonfly, including General Partner Tom Schmidt. Assistant U.S. Attorney Rehn made this disclosure in court before requesting to seal the transcript of his statement. Dragonfly had backed Tornado Cash in its early days, according to emails presented as evidence.
🚨NEW from the @rstormsf trial: The DOJ is apparently still considering charges against an unspecified number of people at crypto VC firm @dragonfly_xyz, not just General Partner @tomhschmidt, according to AUSA Rehn.
After saying this in court, Rehn asked for the transcript of… https://t.co/jt1XCCWO0P
— Eleanor Terrett (@EleanorTerrett) July 25, 2025
These internal communications showed active discussions between Dragonfly’s leadership and Tornado Cash developers regarding Know Your Customer (KYC) protocols. Roman Storm and his cofounders reportedly asked for guidance from Dragonfly’s Managing Partner and Schmidt about integrating user verification. Legal teams flagged these exchanges to argue the firm’s deeper involvement.
Tom Schmidt invoked his Fifth Amendment rights and declined to testify, which further fueled defense arguments for granting him immunity. The court has not yet decided whether Schmidt will receive protection in return for testimony. Meanwhile, the DOJ’s consideration of wider charges suggests a continuing expansion of the Tornado Cash investigation.
Trial Highlights DOJ’s Case Against Tornado Cash Developers
The government accuses Roman Storm and others of enabling over $7 billion in illicit crypto transactions through the Tornado Cash platform. Authorities claim North Korean-linked hackers, among others, used the tool to launder stolen assets. The prosecution presented evidence tying Tornado Cash to the Ronin Bridge hack, which resulted in massive losses.
A witness from Vietnam described discovering 170,000 Ethereum missing and tracing it to Tornado Cash, though no further links emerged. Prosecutors emphasized that the service operated without checks, allowing bad actors to exploit the system. They portrayed Storm as knowingly operating a tool that enabled financial crime.
Defense attorneys pushed back by likening Tornado Cash to neutral tech such as VPNs. They argued that Storm did not knowingly facilitate laundering, and that smart contracts were not property. Legal observers believe the case outcome could reshape U.S. crypto policy for years.
DOJ’s Crypto Strategy Expands Beyond Tornado Cash
Despite a crypto-friendly White House, federal agencies continue to pursue mixer-related cases, highlighting internal divisions within the administration. Prosecutors also indicted Samourai Wallet’s founders for laundering $100 million through a similar scheme. These moves reflect a persistent strategy to dismantle privacy tools that enable anonymous transactions.
The DOJ recently charged four North Korean operatives for laundering $900,000 in crypto via Tornado Cash. Investigators allege they posed as remote IT workers while moving funds through the platform. These charges underscore the DOJ’s intent to connect cybercrime with crypto infrastructure.
Roman Semenov, a cofounder, remains at large while Alexey Pertsev was jailed in the Netherlands earlier. With Schmidt under scrutiny, the DOJ’s case against Tornado Cash continues expanding beyond its developers. As closing arguments approach, more revelations may emerge about Dragonfly’s role and federal priorities.
