DOJ Will Not Charge Dragonfly Over Tornado Cash Stake

The U.S. Department of Justice (DOJ) reversed its statement from July 25 about considering charges against crypto venture capital firm Dragonfly for investing in Tornado Cash early on.

According to Dragonfly co-founder Haseeb Qureshi, during a court hearing on July 28, DOJ prosecutors indicated they would not target Dragonfly or any of its executives in the ongoing Tornado Cash investigation. The prosecutors overturned their previous comments.

Qureshi posted on X that earlier media reports about the firm facing criminal charges were wrong. He also criticized the DOJ’s previous remarks as unprecedented and against policy, arguing that prosecutors cannot speculate about potential charges in open court. 

The media reports that they were planning to bring charges against Dragonfly were inaccurate, and neither Dragonfly nor any of its principals are targets in their investigation,

he wrote.

During the July 25 proceeding, prosecutors said they were considering charging Dragonfly for its 2020 investment in PepperSec, Inc., the developer of Tornado Cash. The suggestion of charges worried some investors and raised questions about legal risks for venture firms backing early blockchain projects.

The case unfolds amid a broader government crackdown on Tornado Cash. Co-founder Roman Storm faces federal charges of conspiracy and sanctions violations for his work with the mixer. 

The U.S. Department of the Treasury’s Office of Foreign Assets Control designated Tornado Cash in 2022. OFAC sanctions, rather than asset seizures, effectively halted Tornado Cash operations. The government alleged the platform helped launder billions of dollars.

Dragonfly’s early investment in Tornado Cash happened before the platform’s official blacklisting. The investment drew attention as regulators tried to trace financial flows connected to illegal transactions. With Monday’s clarification, the firm appears cleared of immediate legal threats related to its stake in Tornado Cash.

The Tornado Cash case continues with Storm’s criminal charges pending. The DOJ has not announced any timeline for resolving the broader investigation into the mixing service.