Alexey Pertsev’s ‘lol’ about Ronin hack questioned in Tornado Cash trial

When Alexey Pertsev learned that the epic $625 million hack of Ronin Bridge in 2022 took five days to discover, he responded: “lol.”

This is one of the crypto heists which were laundered through the now-sanctioned crypto mixer, Tornado Cash.

On day one of the Tornado Cash developer’s criminal trial in the Netherlands on Tuesday, this piece of evidence emerged as prosecutors sought to show that the 30-year-old Russian was well aware the crypto mixer was laundering dirty money from DeFi heists and hacks.

On Wednesday morning, the public prosector wasted no time in bringing up Pertsev’s response to the hack as evidence he was not concerned about crime.

Illicit gains

Pertsev, 30, who is facing a potential eight-year prison sentence if he is convicted, testified that he was “disappointed” criminals used Tornado Cash to conceal illicit gains.

But there was nothing he could do about it, he told a three-judge panel in English, which was translated into Dutch.

The technical nature of decentralised crypto mixers running on immutable smart contracts made it hard, if not impossible, to police Tornado Cash the way traditional online financial firms do.

Chat histories

Even so, the judges pressed Pertsev on whether he was taking crimes seriously enough. They considered evidence produced by investigators after they confiscated Pertsev’s devices and brought up his chat histories.

In a group chat called “Pablo Peppers” with co-developers, Roman Storm and Roman Semonov, Pertsev allegedly responded to news of the $625 million Axie Infinity Ronin Bridge hack with “lol.”

But Pertsev said on Tuesday that doesn’t mean he thought it was funny.

“I have a habit of using it to express surprise,” he told the judges.

And he testified that he was not “consciously aware that people with bad intentions” were abusing the protocol.

“I cannot take full responsibility, just me, for what is happening,” he said. “I don’t believe it is fair.”

‘I cannot take full responsibility, just me, for what is happening. I don’t believe it is fair.’

Alexey Pertsev

Pertsev is a Russian national living in the suburbs of Amsterdam. Dutch prosecutors allege Pertsev facilitated the laundering of $1.2 billion of illicit funds through Tornado Cash — a decentralised protocol which obfuscates crypto transaction history — between 2019 and 2022.

Pertsev’s arrest in 2022 rang alarm bells for DeFi and open source developers around the world who have since rallied to his side.

The outcome of the trial may very well determine if software developers will be held accountable if criminals use their code.

The modest courtroom in the Dutch city of s-Hertogenbosch was half-filled. Pertsev is being tried by a three-judge panel rather than a jury, which is customary in the Dutch legal system.

The day was dedicated to the judge’s questioning. On Wednesday, the prosecution and the defence are presenting more testimony.

A picture of King Willem-Alexander, a national symbol for the rule of law, adorned the wall behind the judges who will rule in what appears to be the most important case in crypto’s short history.

Clash of languages

Aside from cultural differences, language proved a challenge in the proceedings, especially when it came to blockchain technicalities.

A stoic and reserved Pertsev, wearing a white polo sweater, sat with his defence lawyer on one side and alternating Russian and English interpreters on the other.

They translated questions from the judges and at times the clash of languages created a sense of tension and confusion, further slowing down the proceedings.

“It’s a disfavour to do it half broken English, half broken Russian and then mix in crypto terms plus Dutch translation,” Eléonore Blanc, founder of Crypto Canal community in Amsterdam and a key figure supporting Pertsev, told DL News.

‘It is not a criminal source of income and I can use it in any way I want.’

Alexey Pertsev

The case could turn on whether prosecutors prove Pertsev intended to launder cash from unlawful activity in Tornado Cash’s crypto mixer, and what they did about it when they found out.

To that end, the judges probed Pertsev to determine whether he and the other key developers benefited from Tornado Cash, and how much control they really had over the way it operated.

Five developers, including Pertsev, were allocated 30% of the native token, TORN, which gives them additional voting power for decisions on the protocol.

Pertsev said he doesn’t consider the tokens as a reward but rather as a distribution of voting power to those who contributed to the project.

The judges also pointed out that Pertsev used his TORN tokens to buy a Porsche, and asked whether he benefited from token airdrops

“It is not a criminal source of income and I can use it in any way I want,” Pertsev said.

Smart contracts

Ameen Soleimani, a prominent Ethereum developer who watched the trial, said there were cultural barriers between the defendant and the panel of judges.

“There’s nothing anybody can do to prevent people from interacting with the smart contracts,” he told DL News.

“Even if you take down the [user interfaces], people can still use them through command line tools, Etherscan, and other UIs, the contracts will still be there.”

Yet the Dutch Fiscal Information and Investigation Service officers had found that 93.5% of users accessed Tornado Cash through the main website.

Nonetheless, Pertsev was trying to explain to the judges that there is no way Tornado Cash could impose a know-your-customer protocol for users.

“I don’t think this is something that the judges understand or maybe it’s something they want to understand,” Soleimani said.

Tornado Cash introduced a compliance tool in June 2020, that users could choose to use to prove their transaction history was clean.

One of the judges was sceptical. “Criminals can relatively easily go through Tornado Cash unobserved,” she argued.

The defence argued that it is up to exchanges, where funds from Tornado Cash ultimately to cash out, to recognise bad actors.

“If crypto comes from Tornado Cash, then they can see it immediately and they have an automatic system to flag that,” Keith Cheng, Pertsev’s lawyer, told DL News following completion of the day’s testimony. “Other bitcoin mixers try to hide the fact the funds even come from a mixer.”

‘My client did his very best to explain a very complex situation and project.’

Keith Cheng, Alexey Pertsev’s lawyer

But regulated financial institutions, which must comply with strict anti-money laundering laws, should bear responsibility for checking that criminal funds are brought onto their platforms, he said.

Unlike a centralised exchange, Pertsev does not have control or oversight over Tornado Cash users.

“My client did his very best to explain a very complex situation and project,” Cheng said.

The judges asked if Pertsev was compelled to distance himself from Tornado Cash when we realised hackers were abusing the mixer.

Pertsev said he was confused, and did not want to answer the judges’ query. On some occasions, Pertsev responded to questions after a break.

But when asked about why to open source a protocol, he laid down the philosophy.

“We have to have a way to share our ideas and their implementation, this is why smart contracts are open,” Pertsev said. “Then other people can verify after me what kind of contributions I made.”

Inbar Preiss is DL News’ Brussels correspondent. Contact the author at inbar@dlnews.com.