A federal prosecutor let slip that the Division of Justice continues to be mulling expenses in opposition to Dragonfly’s Tom Schmidt, earlier than promptly asking the courtroom to seal the remark. The Twister Money case is now entangling enterprise capital in methods few anticipated.
Abstract
- A DOJ prosecutor revealed that expenses in opposition to Dragonfly’s Tom Schmidt are nonetheless into account, earlier than requesting the assertion be sealed.
- The Twister Money trial is surfacing a possible new concept of investor legal responsibility in crypto instances, implicating VCs for advisory roles
In response to a July 25 X put up by Fox Enterprise journalist Eleanor Terrett, a Division of Justice prosecutor disclosed in open courtroom that felony expenses are nonetheless being thought of in opposition to Tom Schmidt, a common companion at crypto enterprise agency Dragonfly.
https://twitter.com/EleanorTerrett/standing/1948760083917140081
Assistant U.S. Legal professional Thane Rehn disclosed in the course of the trial of Twister Money developer Roman Storm, the place emails between Schmidt, Dragonfly co-founder Haseeb Qureshi, and Storm’s group have been offered as proof. One such alternate confirmed the founders searching for suggestions on implementing KYC measures, a element that complicates the federal government’s narrative of willful cash laundering facilitation.
Twister Money trial intensifies, investor legal responsibility takes middle stage
The DOJ’s curiosity in Tom Schmidt seems to stem from Dragonfly’s function as Twister Money’s main enterprise backer and from inside communications that prosecutors could argue present deeper involvement than typical funding oversight.
Emails offered in courtroom reveal Schmidt and Dragonfly co-founder Haseeb Qureshi engaged instantly with Twister Money’s founders, even discussing potential know your buyer (KYC) implementations.
This complicates the federal government’s declare that the builders knowingly facilitated cash laundering, because it suggests efforts to discover compliance. But prosecutors appear to be testing a novel concept: that monetary backers may bear legal responsibility if their portfolio firms’ instruments are later misused, even when the buyers by no means managed the protocol’s operations.
Rehn’s request to seal his comment about potential Dragonfly expenses hints on the DOJ’s sensitivity round its technique. Superficially, this will point out ongoing investigations or a need to keep away from prematurely shaping public notion earlier than expenses are finalized.
It additionally underscores the excessive stakes for Schmidt, who, by invoking the Fifth Modification, signaled he believes his testimony would possibly expose him to prosecution. The protection had pushed for immunity to compel his account, seeing him as a key witness to counter the DOJ’s narrative. With out his testimony, Storm’s group loses a possibility to focus on Dragonfly’s advisory function, which may have helped distance the founders from allegations of felony intent.
The implications ripple far past this trial. If the DOJ pursues Schmidt or different Dragonfly figures, it may set a precedent that might chill enterprise funding in privateness instruments or open-source tasks broadly. Buyers could demand unprecedented oversight of technical selections or keep away from contentious sectors altogether.
In the meantime, Roman Storm and co-defendant Roman Semenov face expenses, together with conspiracy to commit cash laundering and sanctions violations, which carry a mixed most sentence of 40 years in jail. The DOJ alleges they knowingly enabled criminals, together with North Korea’s Lazarus Group, regardless of the builders’ insistence that Twister Money was merely impartial infrastructure.
