Enterprise capital agency Dragonfly mentioned Friday that the U.S. authorities is weighing potential prices over its 2020 funding in PepperSec, the developer of Twister Money, marking a uncommon occasion the place federal prosecutors could goal a enterprise investor for backing a crypto mission.
In an in depth assertion, Dragonfly managing companion Haseeb Qureshi referred to as the prospect of such prices “outrageous” and legally unfounded.
He mentioned the agency invested in PepperSec in August 2020 after securing an unbiased authorized opinion that confirmed Twister Money, as designed, complied with federal steerage issued by the Monetary Crimes Enforcement Community (FinCEN) in 2019.
Qureshi additional said that Dragonfly believed strongly in supporting open-source privacy-preserving applied sciences and continues to face by that funding.
The event comes days after the prosecution confronted a setback in developer Roman Storm’s trial after the FBI failed to attach funds stolen from a key witness to Twister Money.
Twister Money, launched in 2019, is a decentralized protocol that mixes cryptocurrency transactions to obscure sender and recipient particulars. The device, whereas valued by privateness advocates, has been accused by U.S. authorities of facilitating cash laundering for hacking teams, together with North Korea’s Lazarus Group.
The Treasury Division’s Workplace of International Property Management (OFAC) sanctioned Twister Money in 2022, however subsequent court docket challenges pressured the federal government to cut back sure facets of its sanctions, a improvement Dragonfly cited as proof of the protocol’s authorized standing.
Qureshi mentioned that Dragonfly neither operated Twister Money nor had any contact with illicit customers, emphasizing that it supplied PepperSec the identical degree of steerage it supplies to all portfolio firms.
He additionally revealed that the agency totally complied with a Division of Justice subpoena issued in 2023 and was informed it isn’t a direct goal of the continued investigation.
In response to Qureshi, the federal government’s point out of Dragonfly throughout a current court docket continuing was an try and weaken Twister Money’s protection, probably by complicating testimony from Dragonfly co-founder Tom Schmidt.
He argued that prosecuting an investor over the conduct of a portfolio firm years after the very fact would have a chilling impact on enterprise funding for privateness applied sciences and blockchain innovation.
Dragonfly’s assertion comes amid heightened enforcement efforts in opposition to crypto privateness instruments, which regulators view as a rising threat for illicit finance. The agency mentioned it stays assured that the DOJ won’t pursue prices, however it pledged to “vigorously defend” itself if needed.
