PANews reported on July 26 that regarding the U.S. Department of Justice considering a lawsuit against Dragonfly for its 2020 investment in the Tornado Cash team. Haseeb Qureshi, managing partner of Dragonfly Capital, argued on Twitter that Dragonfly invested in PepperSec, Inc., the developer of Tornado Cash, in August 2020. The investment was made with a firm belief in the importance of open-source privacy protection technology. Before the investment, external legal advice was obtained, confirming that Tornado Cash's construction complied with legal regulations and FinCEN's guidelines issued in 2019. Dragonfly did not operate or control Tornado Cash, nor did it contact any malicious users. It has always encouraged portfolio companies to comply with the law and maintains that Tornado Cash itself has a legitimate right to exist. Bringing charges against a venture capital firm for the alleged misconduct of its portfolio company would be unprecedented, especially in the current situation.
In 2023, Dragonfly received a subpoena from the U.S. Department of Justice and fully cooperated with the government's investigation into Tornado Cash. The Department of Justice has clearly stated that Dragonfly itself is not the subject of the investigation. Like all investments, the advice and support Dragonfly provided to PepperSec were the same as those provided to all portfolio companies. Dragonfly believes that the government's statements in court are primarily aimed at weakening Tornado Cash's defense—making it more difficult to subpoena Tom to testify. Dragonfly does not believe that the Department of Justice will actually bring such an absurd and baseless accusation. However, if they do, Dragonfly intends to defend itself with full force.
Previous report, the U.S. Department of Justice may bring Tornado Cash-related charges against Dragonfly employees.
