Arbitrum DAO has retracted a proposal to donate up to $1.28 million in crypto to support the legal defense of Tornado Cash developers facing criminal charges. The proposal was removed due to legal concerns, but alternative options are being explored.
Arbitrum DAO, a decentralized organization that manages the development and governance of the Arbitrum blockchain, has withdrawn a proposal to donate up to $1.28 million in cryptocurrency to help the legal defense of Tornado Cash developers, who are accused of violating federal laws.
The proposal was removed from the Arbitrum discourse forum after token holders expressed legal worries about the donation. However, the Arbitrum DAO community is still looking for other ways to fund the developers’ legal defense, as they have received strong support from the decentralized finance (DeFi) community.
Arbitrum DAO is a community-driven organization that oversees the Arbitrum blockchain, a layer-2 scaling solution that enables fast, cheap, and secure transactions on Ethereum. Arbitrum DAO allows token holders to participate in the decision-making process of the Arbitrum network by proposing and voting on various issues and initiatives.
The proposal to fund the legal defense of Tornado Cash developers was submitted by Joseph Axisa, an Arbitrum contributor, on Wednesday. The proposal aimed to allocate between 200,000 and 600,000 ARB tokens (equivalent to approximately $400,000-$1.2 million) to support the legal defense of Roman Storm and Alexey Pertsev, two of the co-founders of Tornado Cash.
Tornado Cash is a smart contract protocol that allows users to send and receive Ethereum transactions with enhanced privacy and anonymity.
Storm and Pertsev are facing criminal charges for allegedly violating the Bank Secrecy Act and the International Emergency Economic Powers Act, by facilitating transactions with sanctioned countries and entities, such as Iran and North Korea.
A third co-founder, Roman Semenov, who was also charged, remains at large. The U.S. Department of Justice and the U.S. Treasury Department filed the charges in November 2022.
The proposal suggested that the donated funds would go to the crowdfunding campaign of WeWantJusticeDAO, a decentralized organization that was created to raise funds for the legal defense of the Tornado Cash developers. The proposal also stated that the donated tokens would be held on Juicebox, a crypto-focused fundraising platform and that the funds would be released in monthly installments of around $10,000.
However, by the evening of March 8, the proposal post was no longer visible on the Arbitrum discourse forum. The exact reason for its removal and the timeline of events surrounding it remain unclear. An Arbitrum representative confirmed to The Block that the proposal was removed at the author’s request but did not provide further details.
According to Unchained, a crypto news outlet, the proposal was retracted due to legal concerns raised by some token holders, who feared that the donation could expose them and the Arbitrum DAO to legal risks and liabilities. Some token holders also questioned the legitimacy and transparency of the WeWantJusticeDAO and the Juicebox platform, as well as the validity and necessity of the legal defense.
Despite the withdrawal of the initial proposal, members of the Arbitrum DAO community are still considering alternative ways to finance the legal defense of the Tornado Cash developers, a source familiar with the situation told The Block.
According to the source, one potential option that is being discussed is to direct funds to Coin Center, a prominent non-profit organization that advocates for cryptocurrency policy and regulation. Coin Center could then use the funds to support the legal defense of the developers or to lobby for more favorable laws and regulations for the crypto industry.
Additionally, a revised version of the proposal is expected to surface on the Arbitrum DAO forum in the coming week, as disclosed by another source to The Block. The revised proposal could address some of the legal and ethical issues that were raised by the token holders and could also include more details and safeguards regarding the donation process and the recipients.
Since the developers’ arrests, they have received significant support from the DeFi community, a broad segment of the crypto industry that is characterized by its commitment to principles of financial autonomy and innovation.
DeFi projects and protocols, such as Uniswap, Compound, Maker, and Aave, have expressed their solidarity and sympathy with the Tornado Cash developers and have called for more clarity and fairness in the crypto regulation and enforcement.
Tornado Cash and its creators are widely regarded as pioneers and innovators in the DeFi space, as they have developed a protocol that enables users to protect their privacy and identity on the Ethereum blockchain, which is otherwise transparent and traceable.
Tornado Cash uses zero-knowledge proofs, a cryptographic technique that allows users to prove that they own or know something without revealing what it is. By using Tornado Cash, users can send and receive Ethereum transactions without exposing their addresses, balances, or transaction history.
