# Keith Cheng | Insight into the TornadoCash case in the Netherlands | ETHDam 2023

- Channel: [CryptoCanal](https://streameth.org/cryptocanal)
- Date: 2023-10-07
- Duration: 19:59
- Watch: https://streameth.org/watch/yt-QOFQzdd9zx8
- YouTube: https://www.youtube.com/watch?v=QOFQzdd9zx8

## Description

Keith Cheng, Advocatenkantoor Cheng.

As Alexey Pertsev's Lawyer, Mr. Cheng gave us an insight into the TornadoCash case in the Netherlands.

ETHDam is a Hackathon & Conference that gathered over 500 DeFi and Privacy builders on the 20th and 21st of May 2023 in Amsterdam. 

Privacy is normal. Following the arrest of Alexey Pertsev, a Tornado Cash developer in the Netherlands, ETHDam 2023 is determined to counter the chilling effects of the lawsuit and bridge worlds to discuss the future of privacy, encouraging to build on the shoulders of cypherpunk giants.

ETHDam is powered by CryptoCanal, - a blockchain education and events platform growing in Amsterdam, spreading its roots to Rotterdam and Zurich. 

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## Transcript

foreign [Music] [Applause] for the people who already know me and supported me I would like to say thank you very much it was so hard time for me I really appreciate your support I'm here today just to welcome you all and I wish you good luck and to introduce Mr Chang he's a lawyer that represents my case here in Netherlands and he has some thoughts ideas to share with you today so please welcome kit thank you all for joining us today I'm here to reveal the truth and defend the innocence in the fact of serious allegations by presentation will provide a clear Insight of the case and shed light on some misconceptions and myths the justice system and public seems to have misconception number one tornado cash was created so people can loan their money there's a misconception that tornado cash is aimed at money laundering I want to make clear from the start the tornado cash is a privacy data tool software as we all know ethereum is transparent this means that there is a big privacy issue for example if somebody has your wallet address they can see how you spend your crypto and infringe on your private life there's a need for privacy on ethereum before tornado cash there was a lot of discussion in the ethereum community about solving this privacy issue people within the community were calling our people to come up with a solution famous people like vitalik buterin this prompted people like Alex betsev to help with the creation of tornado cash legal economic explanations for using genetic cash the public prosecution has stated that that there is no legal economic explanation for the use of a mixer to know to name a well-known example the co-founder of ethereum has used a mixing service to anonymously donate money to the Ukraine to support the country but there are plenty of reasons to use tornado cash public figures want to keep their personal lives private private banks that accept crypto and act on behalf of the customer Traders and whales who do not want to share their strategy for buying and selling cryptocurrencies Ordinary People want to protect their privacy to avoid being targeted by robbers ordinary people who do not want to share their balance with family neighbors colleagues and the rest of the world donations to charities privacy for staff who receive salary on blockchain and the business owners who provide this salary payments to abortion clinics especially in countries where abortion is not popular payments to political parties and or political candidates these are just some examples of course there could be many more Criminal Intent Alex persev never had any criminal intentions with tornado Cash He and other developers have never hit and openly promoted the Privacy data tool they gave interviews to the media performed at conferences and congresses and allowed themselves to be mentioned by name everywhere this complete transparency does not exactly indicate criminal activity the compliance store is in the essential part of the tornado cash project which has been built in from the beginning it allows tornado cash users to stay compliant to AML checks once third party got money from 1080 cash the third party should ask about source of funds and compliance report in addition the fact that tornado cash includes a compliance tool demonstrates the developer's commitment to responsible use this compliance tool ensures that tornado cash operates within legal boundaries preventing its misuse for illegal activities the goal of tornado cash was to strike a balance between privacy and compliance offering users the ability to protect their information while entering to regulatory requirements one distinctive aspect that sets tornado cash apart from conventional mixers is its guarantee that users will withdraw the exact same cryptocurrency they initially deposited this means users do not engage in direct cryptocurrency exchanges with others therefore even if crypto is deposited from Criminal Source it will be returned the presence of a compliance tool enables receiving third parties to access the transaction history of the cryptocurrency they receive making it a standard practice example of compliance procedure as an example if a user deposits ethereum which was withdrawn from tornado cash to a centralized exchange The Exchange is obligated to request a compliance to report this report enables to exchange to access the risk associated with money laundering for the specific address used to deposit funds into today the cash so it is just an easy just as easy as that it makes tornado cash transparent to regulators and money transmitters I'm sure that people have experienced a compliance procedure with an exchange regarding the process of ethereum if anyone could share their story and experience with us it would be much appreciated maintaining Financial privacy is essential to preserving our financial freedom however it should not come at the cost of non-compliance here I quote the original tornado cash article about compliance as one more confirmation of the intent tool is just the tool you may ask me but hackers used to nail the cash right what do you think about it well for my many years as of experience as a lawyer in these cases I can tell you that money laundering is a complex process and it's not enough just to push one button and unfortunately criminals evolve and adapt much faster than the law to better understand tornado cash let's consider an analogy just like a screwdriver hammer or knife which can be used for both constructive and harmful purposes tornado cash was a tool that could be abused just to make an example just to make it clear for you if you're designing a part of a screwdriver and this screwdriver is being used to break in somebody's house or it used to be used to stab somebody are you responsible for this are you supposed to be obligated to make measures to prevent people with a criminal record to buy a screwdriver of course not however it's crucial to note that tornado cash was not designed for money laundering its primary purpose was to provide privacy in cryptocurrency transactions there are a lot of privacy data tools software and none of their developers are being prosecuted in fact some of these privacy data tools are being recommended by the government for example VPN the virtual private Network the user VPN is legal in the Netherlands and is recommended by the government to protect your privacy VPN is described as an extra layer of privacy protection to prevent your privacy incentive information from being intercepted a security that your online activities cannot be linked to your identity the original IP address of the user is not shown with VPN this description shows some similarities with internet cache so software developed to protect privacy misconception number two tornado cache developers have control over the tool and could not it could but did not prevent deposits of crypto with criminal source in the view of the prosecutor Alex could have prevented the password and withdrawals of crypto with criminal sources on the smart contract level more specifically through implementation of some measures on the router level she also thinks that measures could have been implemented on user interface and relay level to prevent the abuse of tornado cash it is a misconception of the prosecutor that any of the suggested measures would have prevented Hackers from abusing tornado cash no control essential part of Trinity cash 2 operates through smart contracts that are immutable and Beyond any single entities control so no one including the developers of tornado cash Dao can alter or manipulate the tornado Cash Smart contracts efforts to implement AML kyc checks within the surrounding infrastructure are bound to fail eventually as sophisticated malicious actors will invent inevitably exploit the system regardless the tornado Cash Smart contracts could be accessed directly at any point of time implementing checks within the surrounding infrastructure is akin to adding extra locks to a door that lacks surrounding walls in my opinion the solutions that the field that's the financial investigators of the prosecutor offered regarding implementing measures on UI level or smart contract level would only attract more criminals because in the eyes of the public and authorities it would make the tool more compliant but actually all those checks can be easily avoided by criminals what is actually efficient in terms of measures against crypto with a Criminal Source it is the compliance tool misconception number three tornado cash is a typical mixer the prosecutor has the misconception that tornado cash is no different from the typical Bitcoin mixer this is factually incorrect all relevant case law and articles on money laundering in crypto are about the typical Bitcoin mixer but to Native cash is something else entirely this is evident from what I shall bring to your attention in a moment this misconception of the prosecutor leads to the creation of false suspicions and the drawing wrong conclusions for this case based on previous experiences with Bitcoin mixers used for money laundering there are significant differences between the typical Bitcoin mixer and tornado cash privacy solution Bitcoin mixture versus genetic cash privacy solution donated cash is not it's non-custodial in short that means that at no point during the process does it gain control over its uses cryptocurrency this does not necessarily apply to bitcoin mixer today the cash has no administrators Bitcoin mixers as seen in literature and case law are typically designed with the intention to cater to criminals the owners exercise advertise it on platforms like Hydra 20 cash was built for legal purposes and for everyday people Bitcoin mixer as seen in literature and case law is a centralized solution it has one UI one relayer and has no smart contracts to Native cash as multiple uis multiple withdrawal options relay or wallet multiple relayers which are independent donate the cash is not designed for money laundering because of its compliance store Bitcoin mixer can be penalized because there is a person behind it there's no human being behind tornado cash it's a smart contract misconception number four bedsafe has a central role intonated cash it is evident from the prosecutive speech that they try to put Alex in the steering position which is again a strong desire to punish someone because they cannot find the bad guys Community effort to Native cash is impossible without significant significant contribution from the ethereum community here are just some examples that could be easily recognized The Trusted setup ceremony with over 1100 contributions ensures the security and integrity of tornado cash tools that was the biggest event of its kind at that time anonymity set level of privacy depends on the number of users benefiting from the ethereum communities collaboration more users use the tool a higher level of privacy it can provide the smart contract on its own cannot generate privacy as a fact to name the cash dial create opportunities for many people around the globe to participate participate in the evolution of privacy on ethereum on the ethereum blockchain history of dial proposals show active involvement of the community in the course of develop development a significant proportion of the project the rights inspiration from the ideas and prototypes contributed by the ethereum community for example vitalex blog post describing a minimal mixer design semaphore project that exists alongside 280 cash for years circum Library which Trinity cash utilize for zero knowledge technology and so on it's hard to ignore the talent of the to Native cast developers but it's clear to me that tornado cash was put together by ethereum Community for the community Alex perceive alone could not make such a big difference autonomous one more aspect of the steering wheel is presuming the tornado cache data tool requires maintenance however the core functionality of tornado cache relies on utilization of smart contracts maintained by the block ethereum blockchain as I mentioned before it could be accessed in many ways using different uis and clis since smart contracts do not require a third-party involvement work only by effort of a user for the user the tool can continue to live conclusions about to Native cash to net a cash was developed with the intention of protecting privacy rights not enabling money laundering there is no Criminal Intent with tornado cash liability for the use of tornado cash is a tool rest with the user and recipient to name the cash smart contract Works autonomously no maintenance and no influence on operation donate the cash developers of the or Dao has no control or influence of the smart contracts that deals with mixing tonight the cash privacy solution as major differences with a typical Bitcoin mixer tornado cash is a public good created by the collectors collected Wellness of the ethereum community the compliance tool is the only thing that really works and it's been built in from the start all other alternative measures as proposed by the field are of no use of course there are many more things that could not be clear to you but unfortunately limitations of this presentation does not allow me to cover all the relevant topics we still have an ongoing trial and we still have to work on the defense the next core tearing is on the 24th of May but it's not final the myth perceive is an FSB agent before I finish I would like to ask everyone not to believe everything that is spread in the media it's important to rely on verified information and avoid spreading unverified claims or rumors for example to make a more attractive type of title many media resources made a claim that persev is a FSB agent I would like to demystify that the claim that Alexi perceived one of the developers of tornado cash is an agent of the FSB the Russian Federal Security Service is a false rumor there is no credible evidence to support this allegation perceived previous employment and digital security a Russian company sanctioned for providing support to the FSB does not automatically imply his involvement with the FSB on behalf of my client I would like to thank all of you for your attention and support also I would like to mention that peppersec has set up a legal defense fund to fight for Alex's freedom and defend itself and her employees if you are considering toward this course please follow this link thank you all [Applause]