‘S-HERTOGENBOSCH, Netherlands – Alexey Pertsev has been ordered to stay in jail until Feb. 20 after a Netherlands court found the Tornado Cash developer represented a flight risk.
Pertsev has been held in detention since August, days after the U.S. Treasury used sanction powers against the Tornado protocol, which it said had been used to launder over a billion dollars' worth of cryptocurrencies and to support North Korean hackers.
At the hearing on Tuesday, Dutch public prosecutor Martine Boerlage announced money-laundering charges for the first time. Boerlage had said little more about the case than a press release, but has now accused Pertsev of facilitating the processing of dirty money by writing the Tornado Cash code.
Boerlage brushed aside arguments that Tornado Cash was a decentralized protocol that Pertsev was powerless to control, claiming that it was in fact one and the same as PepperSec, a company Pertsev worked for alongside fellow developers Roman Semenov and Roman Storm.
Outside the courtroom, Pertsev’s lawyer, Keith Cheng, told CoinDesk he was “very disappointed” with the decision.
“It's clear to us that these judges are not as familiar with the subject matter as they should be,” Cheng said. “At the moment, the case law regarding criminal activities is all about bitcoin mixers … It's very important that the court understands that Tornado Cash is something different.”
Pertsev’s arrest and detention has drawn widespread outcry, including protests in Amsterdam and a tweet from Edward Snowden, an American who now lives in Russia after he leaked documents from the National Security Agency, comparing Pertsev’s treatment to the kid gloves afforded to executives at collapsed crypto exchange FTX.
“If you peel everything off, what we have here is a fairly clear-cut money-laundering case,” Boerlage said, citing laws that forbid the concealment of funds’ origin and movement. “That's exactly what a mixing service like Tornado Cash does for you.”
Boerlage compared the vast sums of money deposited into the protocol after the Ronin Bridge hack with a bank clerk unquestioningly accepting a pile of 100 euro notes for deposit.
“If you as a bank don't know where the money is coming from and haven't yet built in any mechanism to look at that, then there’s a considerable likelihood that your service is laundering money,” she said.
Boerlage also denied claims that the software was autonomous, saying that Pertsev and others had de facto control.
That Pertsev “has nothing to do with Tornado Cash, can be relegated to the realm of fantasy,” the prosecutor said. Pertsev, Semenov and Storm may have held so many tokens for the protocol they could in practice ”always outvote everyone else” when it came to decision making, Boerlage added.
Private chats obtained by the prosecutor between the three showed that in practice they made operational decisions about the protocol, and had effectively acknowledged they were involved in “shady stuff” when they discussed tweeting about how to circumvent money-laundering norms, she said.
“PepperSec is Tornado Cash,” Boerlage added, referring to Pertsev’s idea that he could be released to return to his previous employer as long as he declined to work on the protocol.
Cheng, meanwhile, argued that the service had legitimate uses.
“The goal of Tornado Cash is to bring privacy for the user, giving the user control over crypto transactions,” Cheng said. The prosecution had not convincingly demonstrated specific facts linking Pertsev to the alleged crime as required by Dutch and European law, Cheng added.
Pertsev himself spoke little, though, speaking through a Russian interpreter, confirmed his personal details and referred to the online petition and demonstrations that have been held in his support.
“I am ready to accept all restrictions” should he be released on bail, he said, before his request was declined. “I just want to be able to go to church with my wife.”
Update (Nov. 22, 2022 14:35 UTC): Adds details throughout article.