The U.S. government is sending mixed signals in the criminal case against Tornado Cash co-founder Roman Storm, who has pointed out that Department of Justice prosecutors are still pursuing him even after the Treasury Department's Financial Crimes Enforcement Network withdrew from a planned crackdown on cryptocurrency mixers. Within a day of that withdrawal, federal prosecutors in the Southern District of New York (SDNY) advanced new arguments to keep their case against Storm alive in court.

FinCEN withdraws two unfinished crypto mixer rules

A Tuesday notice posted to the Federal Register's public inspection site and signed by FinCEN Deputy Director Jimmy L. Kirby confirms that the regulator is moving on from its 2023 proposal to define international convertible virtual currency (CVC) mixing as a "class of transactions of primary money laundering concern" under Section 311 of the USA PATRIOT Act, the statute that lets Treasury direct U.S. financial institutions to take special measures against designated money laundering threats. The notice is available on the Federal Register's public inspection site.

The regulator posted a second notice pulling a separate December 2020 proposal that would have required banks and money services businesses to verify and retain identities and transaction records for amounts above $3,000 involving unhosted wallets or foreign platforms operating outside areas covered by U.S. banking rules. If one or several transactions from the same entity exceeded $10,000 within 24 hours, banks and money services businesses would have been required to alert FinCEN.

In its withdrawal notice, FinCEN said it hit the brakes after receiving warnings that the 2023 proposals were too loose in how they defined mixing, writing that the "expansive definition of CVC mixing" risked a chilling effect on legitimate activity and a heavy reporting load on covered institutions. The definition, which Coin Center criticized as "extraordinarily broad," packed dedicated mixing services and auxiliary practices such as pooling funds from several users, splitting transfers into independent transactions, spinning up single-use wallets, and adding user-initiated delays so deposits and withdrawals could not be matched by timing into the same box.

Coinbase flagged the absence of any dollar threshold in its January 2024 comment letter objecting to the same FinCEN proposal.

The agency said that while it agrees with the President's Working Group on Digital Asset Markets' July 2025 report that "lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains," it also believes illicit actors use mixers.

Because the proposals were never finalized, the withdrawals change little for financial institutions. Exchanges will continue to operate in accordance with their anti-money-laundering and know-your-customer rules.

SDNY prosecutors continue to pursue a conviction

Despite rolling back the proposals, SDNY prosecutors pressed on with their own case against Storm in an October 5 letter to U.S. District Judge Katherine Polk Failla, pursuing what they called supplemental authority on venue for two of the charges Storm still faces — a procedural question that determines the district in which those counts can be tried. The court filing was posted to the public docket.

Storm shared the filing himself, writing on X: "The DOJ is still coming after me with everything it has. They really want to see me convicted." The post on X came as Storm marked at least 1,139 days in custody since his arrest.

Prosecutors are building their argument on the precedent set by the September 25 United States v. Sterlingov appeals decision, in which the D.C. Circuit ruled that venue was proper for a mixer operator because transfers to and from the service "furthered [the mixer]'s ability to launder the funds of all users" and because the mixer "served customers in the district." They also cited trial testimony that depositor Shakeeb Ahmed used Tornado Cash from his Manhattan apartment.

What happens next for Roman Storm

Storm was convicted in August 2025 on one count of conspiring to run an unlicensed money transmitting business that moved more than $1 billion in criminal proceeds, a charge carrying up to five years, according to the SDNY. The jury deadlocked on the money laundering and sanctions evasion counts. Prosecutors chose to retry him on those counts, and Judge Failla has set the retrial for April 26, 2027. Storm's September 2025 acquittal motion remains undecided after oral argument in April. A conviction on the two open counts could carry up to 40 years. The venue fight and the acquittal motion are now the key decisions to watch in the case.

The timing frames a real tension in Washington's posture crypto privacy. FinCEN, a rulemaker, is stepping back. SDNY, a prosecutor, is leaning in. The Justice Department has tried to square that circle: in August 2025, Acting Assistant Attorney General Matthew Galeotti said the department works "as prosecutors, not regulators," and would not treat writing code, without ill intent, as a crime, per his remarks.

For now, the regulatory crackdown is gone and the criminal case is not.