On October 5, 2026, federal prosecutors in the Southern District of New York filed a court letter relying on the recent Bitcoin Fog ruling to counter the venue challenge raised by the defense of Tornado Cash co-founder Roman Storm.
🔑 Key Takeaways
- SDNY prosecutors filed an October 5, 2026 letter invoking the Bitcoin Fog precedent to establish venue at Manhattan.
- The D.C. Circuit upheld on September 25 the conviction of Bitcoin Fog operator Roman Sterlingov and his 150-month sentence, confirming venue in Washington D.C.
- Storm’s defense pushes back: key witness Shakeeb Ahmed allegedly used Tornado Cash before, not for, his hack.
- The same day, FinCEN withdrew its 2023 proposal requiring financial institutions to report mixer-related transactions.
- The jury convicted Storm on August 6, 2025 of operating an unlicensed money transmitting business; the civil retrial is set for April 26, 2027.
The Bitcoin Fog precedent mobilizes prosecutors
In a letter addressed to Judge Katherine Polk Failla, the U.S. Attorney’s Office for the Southern District of New York (SDNY) leaned directly on a ruling issued on September 25, 2026 by the D.C. Circuit. That ruling upheld the conviction and 150-month prison sentence handed down to Roman Sterlingov, the operator of the Bitcoin Fog mixing service.
In the Bitcoin Fog case, the D.C. Circuit validated venue in Washington D.C. on the basis of an undercover operation: a special agent deposited approximately $250 in bitcoin into the service and withdrew almost all of it the next day. The court held that this single use was sufficient to establish that Bitcoin Fog had “served customers in the District.”
“The Bitcoin Fog precedent shows that a single deposit into a mixing service is enough to establish venue in the district where that deposit took place.”
SDNY prosecutors, October 5, 2026 letter
| Element | Bitcoin Fog case | Storm case (Tornado Cash) |
|---|---|---|
| Court seized | D.C. Circuit (Washington D.C.) | SDNY (New York) |
| Key ruling date | September 25, 2026 | Pending (Rule 29 motion) |
| Basis for venue | Undercover agent (≈$250) | Witness Shakeeb Ahmed |
| Time in pools | ≈1 day | “A couple of days” |
| Outcome | 150-month sentence upheld | Partial conviction (Aug 6, 2025) |
The DOJ’s argument for New York venue
In Storm’s case, prosecutors rely on the testimony of Shakeeb Ahmed, a Tornado Cash user convicted of hacking, who stated he accessed the protocol from his Manhattan apartment. According to the October 5 letter, his deposit remained in Tornado Cash’s pools for “a couple of days,” a duration deemed comparable to the undercover operation in the Bitcoin Fog case.
On the unlicensed money-transmission charge, prosecutors say the D.C. Circuit held venue established merely because Bitcoin Fog had “served customers in the District.” They argue Ahmed’s testimony shows Tornado Cash did the same in southern New York, establishing venue at Manhattan.
During the April hearing, prosecutor Ben Arad pushed a broader theory: because Tornado Cash primarily served criminals, “even the legitimate transactions that went through Tornado Cash became illegitimate.”
Storm’s defense rejects the Bitcoin Fog parallel
Storm’s attorney, Brian Klein, flatly contests this argument. At the April hearing, he argued Ahmed used Tornado Cash before his hack and “didn’t actually use Tornado Cash for his hack.” The defense further claims Ahmed’s funds stayed in the pools too briefly to advance any alleged conspiracy.
“I’m concerned if that’s your theory.”
Judge Katherine Polk Failla, April 2026 hearing
Judge Failla also cut the prosecutor off mid-sentence as he outlined the theory that legitimate transfers turned illicit simply by passing through a service that mostly served criminals — a sign of judicial concern over the prosecution’s framing.
A rapidly evolving regulatory backdrop
The proceeding plays out against a shifting regulatory landscape. On October 6, 2026, the Financial Crimes Enforcement Network (FinCEN) withdrew its 2023 proposal that would have required financial institutions to report any transaction with international mixers, citing concerns it “could have a chilling effect on legitimate activity.” The agency nevertheless said it would continue monitoring mixers for money laundering and terrorist financing.
A few months earlier, the Fifth Circuit ruled in December 2024 that OFAC had overstepped its authority in sanctioning Tornado Cash. In April 2025, the Department of Justice published a report titled “Ending Regulation by Prosecution”, signaling it would no longer pursue purely regulatory violations in digital asset cases — a stance the Storm prosecution does not follow.
- December 2024: Fifth Circuit vacates OFAC sanctions on Tornado Cash.
- April 2025: DOJ publishes Ending Regulation by Prosecution.
- August 6, 2025: Jury convicts Storm of operating an unlicensed money transmitting business.
- September 25, 2026: D.C. Circuit upholds Sterlingov’s Bitcoin Fog conviction.
- October 5, 2026: SDNY files its letter citing Bitcoin Fog.
- October 6, 2026: FinCEN withdraws its mixer reporting proposal.
- April 26, 2027: Civil retrial on the undecided counts.
Stakes for developer liability in crypto
If the DOJ’s position is accepted, it could durably reshape how courts handle venue for developers of decentralized tools. The crypto community has rallied behind Storm: roughly $4.7 million has been raised for his defense, and the Ethereum Foundation pledged $500,000 for his appeal. Alexey Pertsev, another Tornado Cash co-founder, was sentenced in May 2024 in the Netherlands to 64 months in prison for money laundering.
The outcome of the pending Rule 29 motion will set a major precedent for developer criminal liability in the blockchain ecosystem, even though it is unlikely to move token prices directly.
Conclusion
By mobilizing the Bitcoin Fog precedent, the DOJ is trying to consolidate its position in one of the most symbolic prosecutions tied to crypto privacy tools. For the defense, this reasoning dangerously extends venue to any occasional interaction with a decentralized protocol. Whatever Judge Failla decides on the Rule 29 motion, the Storm case will remain a key test of the boundary between technical innovation and criminal liability for developers in the blockchain ecosystem.
Sources
This article is for informational and educational purposes only. It does not constitute investment advice. Do your own research (DYOR) before making any decision.
