“It doesn’t look like I’m here by any law.”

Biography:

Before his rise to prominence, Alexey Pertsev attended Maritime State University, earning a specialist degree in computer and information systems security. In 2017, he joined security firm Digital Security as a penetration tester.

After his time as a cybersecurity professional, Pertsev co-founded cybersecurity firm PepperSec. Following that, he became an open-source code contributor to Tornado Cash, an Ethereum-based noncustodial cryptocurrency mixer — which is what brought Pertsev to the limelight.

In August 2022, Pertsev was arrested for his contributions to Tornado Cash after government officials alleged North Korean hacking groups had processed over $1 billion in stolen funds through the mixer. Shortly after that, Vitalik Buterin admitted using Tornado Cash to send money to those affected by the war in Ukraine. Pertsev has claimed to have helped over 40,000 users obfuscate more than 150,000 transactions.

Pertsev’s 2022:

2022 was a challenging year for the developer. First, the United States Treasury Department brought sanctions against Tornado Cash for allegedly laundering the equivalent of $7 billion in crypto since its inception in 2019. Shortly after that, Pertsev was arrested on Aug. 10 by authorities in the Netherlands. He was accused of exerting control over Tornado Cash’s voting rights and being the platform’s de facto decision-maker. Pertsev, however, has maintained that he was just an open-source contributor to the protocol. The protocol’s founders, Roman Semenov and Roman Storm, were not arrested.

The case ignited regulatory debates regarding how privacy solutions could be used by money launderers, and whether those costs outweigh the benefits. Web3 enthusiasts have also expressed concerns about the precedent set for open-source code contributors to projects worldwide. In response to Pertsev’s arrest, Coinbase filed a lawsuit, asserting that the sanctions will stifle innovation and violate people’s privacy in the crypto community. As a result of the sanctions, Circle, the company behind the USDC stablecoin, froze over 44 addresses sanctioned by the U.S. Office of Foreign Assets Control. 

Pertsev’s 2023:

Pertsev is expected to be in prison until at least February 2023. Beyond the lengthy court battles and jail time, the developer may emerge as a poster child for Web3’s ethos of decentralization, open-source development, data privacy and ownership. The resulting legal framework could bring two key areas of clarity. First, the courts could determine when it is against the law to create open-source applications that improve the privacy of transactions. Second, they could establish whether open-source developers risk being jailed when malicious actors use their code for illegal activities, like money laundering.

The Pertsev and Tornado Cash saga has presented regulators with something they have not encountered before. It is still unclear why the government punished an open-source code contributor for the protocol’s alleged misuse while the investors, founders and other stakeholders have not received the same treatment. The situation could be one of the most followed developments in 2023 due to the potential ramifications of the case on the future of open-source development.