DOJ Drops Tornado Cash Probe Against Dragonfly—Crypto VC Dodges Legal Storm

In a move that sent shockwaves through crypto legal circles, the Department of Justice reportedly won't pursue charges against Dragonfly Capital over its Tornado Cash ties. The VC firm's managing partner dropped the bombshell today—just as SEC Chair Gary Gensler was probably drafting another 'Howey Test' tweetstorm.

The non-prosecution decision lands like a grenade in DeFi's ongoing regulatory trench warfare. While privacy advocates cheer, TradFi bankers are no doubt fuming—after all, when Wall Street launders money, they at least have the decency to charge 2% management fees first.

This development could signal a subtle shift in crypto enforcement priorities. Or maybe prosecutors just realized chasing VCs is harder than picking on anonymous devs. Either way, the message is clear: in the Wild West of Web3, the house always wins—especially when the house is a $3B venture fund.

DOJ Walks Back Dragonfly Indictment as Roman Storm Trial Nears Conclusion

According to a July 28 report from the crypto executive, the DOJ will not indict Dragonfly on criminal charges stemming from its connections to the troubled crypto mixer Tornado Cash.

Since our statement on Friday, we've received overwhelming support from across the crypto, tech, and venture communities. We want to sincerely thank you all for standing behind us.

The DOJ has now backtracked. They have stated on the record in the trial Monday morning that the… https://t.co/3zQRAwmal6 pic.twitter.com/9vSrJseTMx

Including a screenshot of court testimony from federal prosecutor Nathan Rehn, Qureshi slammed the DOJ’s open court statements on Friday as “unprecedented” and “a clear violation of DOJ policy.”

“The DOJ has now backtracked,” Qureshi said in the Monday X post. “They have stated on the record in the trial Monday morning that 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.”

The Dragonfly executive also took time to show public support for Storm as his landmark trial begins to wrap up in the Manhattan federal courthouse.

“With that behind us, the focus should remain on Roman Storm’s trial, which is now nearing closing arguments as soon as this week,” said Qureshi. “Its outcome will have massive implications for open-source software and privacy rights in America.”

“We are hopeful that the American judicial system will get this right,” he added.

It’s been an intense few weeks for Storm as he attempts to bolster financial contributions amid his trial on money laundering charges and sanctions violations.

Prosecutors claim Storm laundered and concealed more than $1 billion through Tornado Cash—including hundreds of millions for the Lazarus Group, North Korea’s state-sponsored hacking organization.

If convicted, Storm faces up to 45 years in federal prison.