Endeavor capital firm Dragonfly acknowledged Friday that the U.S. authorities is weighing doable charges over its 2020 investment in PepperSec, the developer of Twister Cash, marking a rare occasion the put federal prosecutors could well perhaps perchance target a challenge investor for backing a crypto mission.
In an intensive assertion, Dragonfly managing associate Haseeb Qureshi called the likelihood of such charges “defective” and legally untrue.
He acknowledged the firm invested in PepperSec in August 2020 after securing an fair honest appropriate notion that confirmed Twister Cash, as designed, complied with federal steering issued by the Monetary Crimes Enforcement Community (FinCEN) in 2019.
Qureshi extra stated that Dragonfly believed strongly in supporting commence-offer privacy-keeping applied sciences and continues to stand by that investment.
The improvement comes days after the prosecution confronted a setback in developer Roman Storm’s trial after the FBI failed to join funds stolen from a key factor in to Twister Cash.
Twister Cash, launched in 2019, is a decentralized protocol that mixes cryptocurrency transactions to imprecise sender and recipient tiny print. The instrument, whereas valued by privacy advocates, has been accused by U.S. authorities of facilitating money laundering for hacking groups, including North Korea’s Lazarus Neighborhood.
The Treasury Division’s Place of job of International Sources Alter (OFAC) sanctioned Twister Income 2022, nevertheless subsequent court challenges compelled the authorities to slash again definite functions of its sanctions, a fashion Dragonfly cited as proof of the protocol’s honest appropriate standing.
Qureshi acknowledged that Dragonfly neither operated Twister Cash nor had any contact with illicit customers, emphasizing that it supplied PepperSec the identical stage of steering it affords to all portfolio companies.
He also published that the firm fully complied with a Division of Justice subpoena issued in 2023 and develop into told it is no longer an instantaneous target of the continuing investigation.
In step with Qureshi, the authorities’s mention of Dragonfly all the way via a as a lot as date court proceeding develop into an try to weaken Twister Cash’s defense, presumably by complicating testimony from Dragonfly co-founder Tom Schmidt.
He argued that prosecuting an investor over the habits of a portfolio company years after the fact would dangle a chilling stop on challenge funding for privacy applied sciences and blockchain innovation.
Dragonfly’s assertion comes amid heightened enforcement efforts against crypto privacy instruments, which regulators seek as a growing likelihood for illicit finance. The firm acknowledged it remains assured that the DOJ is no longer going to pursue charges, nevertheless it absolutely pledged to “vigorously defend” itself if essential.
