US DOJ Targets Dragonfly VC

Alpha Team
July 26, 2025

DOJ Considers Charges Against Dragonfly in Tornado Cash Case

DOJ's Trial Revelation: During Roman Storm's trial on July 25, 2025, Assistant U.S. Attorney Thane Rehn disclosed that the DOJ is contemplating charges against the crypto VC firm Dragonfly for its August 2020 investment in PepperSec, the developers behind Tornado Cash. Storm is facing up to 45 years in prison for conspiracy to commit money laundering and sanctions violations. Rehn mentioned speaking with Tom Schmidt's lawyer, John Bostick, and when the judge asked if they were looking to prosecute everyone at Dragonfly, Rehn responded, "Not everyone, but Schmidt and..." before requesting the transcript be sealed, which Judge Failla approved. Court exhibits included emails between Storm, his co-founders, and Dragonfly's Haseeb Qureshi and Tom Schmidt, discussing potential KYC implementation for compliance. Schmidt has invoked the Fifth Amendment, had his devices seized, and his home raided. Sanctions on Tornado Cash were imposed in August 2022 and largely lifted in 2025.

Investment Details: Building on this revelation, Dragonfly's investment in PepperSec occurred in August 2020, driven by their belief in open-source privacy-preserving technology. Before investing, they secured a legal opinion confirming alignment with FinCEN's 2019 guidance. In 2023, the firm received a DOJ subpoena and cooperated fully, with the DOJ later clarifying that Dragonfly was not a target. They provided PepperSec with the same standard advice and support given to other portfolio companies. Dragonfly had no operational control over Tornado Cash, no interactions with malicious users, and consistently encouraged legal adherence. Tornado Cash, launched in 2019, uses smart contracts to obfuscate Ethereum transactions. The sanctions' lifting in 2025 was bolstered by the ruling in Van Loon v. Department of the Treasury. The government's courtroom statement is viewed as an attempt to undermine the defense by complicating Schmidt's potential testimony.

Firm's Official Reply: In response to these developments, Dragonfly Managing Partner Haseeb Qureshi stated, "We believe deeply in Americans’ right to privacy... We stand by our investment." He further commented, "Bringing charges against Dragonfly would be outrageous... and would induce a chilling effect onto all investment into crypto." Qureshi also expressed that "We believe the government’s statement in court today was primarily to undermine a defense of Tornado Cash." The firm has committed to "vigorously defend" itself if charges are filed. Additionally, Storm's legal team requested a mistrial following an issue with a witness. For those interested in supporting, donations to Roman Storm's legal defense can be made as trial expenses continue to mount. Read More.

️ On today's Top Picks:

📉 Galaxy sells $9B+ of $BTC for "Satoshi-era" investor.
👀 Succinct introduces the Succinct Foundation.
🎩 Former BlackRock executive joins SharpLink $SBET.
💰 Courtyard raises $30M Series A led by Forerunner.

Read time: ⏰ 5 minutes

Crypto News

• ⭐️ US DOJ considers charges against Dragonfly partners over Tornado Cash investment; Dragonfly co-founder Haseeb Qureshi says, "...we intend to vigorously defend ourselves," on X.

• ⭐️ Galaxy Digital sells more than 80K (~$9B+) Bitcoin $BTC; the BTC belonged to a "Satoshi-era" investor.

• Polychain sells Celestia $TIA stake to the Celestia Foundation for $62.5M; stake to be reassigned to new investors.

• ICYMI The President’s Working Group on Digital Assets to release first policy report on July 30th; led by David Sacks, Bo Hines, and developed with the Treasury, Commerce Department, SEC, CFTC, & others.

Alpha

• Monad posts, "only one of these details is correct," in reference to reported launch date (September 29th) and total token supply (100B) on CoinMarketCap.

• ⭐️ Succinct introduces the Succinct Foundation; to potentially launch TGE & airdrop soon.

• Sapien releases $SAPIEN tokenomics; 13% of SAPIEN supply is allocated to Seasonal Airdrops.

• Satlayer posts, "probably nothing," on X; to potentially launch TGE & airdrop soon.

• Angstrom by Sorella Labs launches on Mainnet; Sorella raised $7.5M in Seed funding led by Paradigm in August 2024.

• Superbridge posts, "Something new coming soon," on X; Superbridge powers the native bridge contracts for Superchain chains.

Airdrops

• Airdrops, Checkers, & Points by Olimpio.

• ICYMI PumpFun Founder says there will be no $PUMP airdrop in the immediate future; PUMP currently trading below its ICO price.

• ICYMI Sonic launches $S season 1 airdrop claim; 25% claimable today, 75% vested; Sonic season 1 participants are eligible.

• ICYMI Treehouse launches $TREE airdrop eligibility & allocation checker; Treehouse GoNuts Season 1 participants & Treehouse Squirrel Council NFT holders are eligible.

• ICYMI Airdrops, Checkers, & Points (July 14th) by Olimpio.

Finance News

• US Federal Reserve Chair Jerome Powell tells multiple associates & allies he will NOT resign.

• Strategy $MSTR increases new Perpetual Preferred Stock Offering from $500M to $2B; to use proceeds to buy more Bitcoin $BTC.

• Ark Invest $ARKK $ARKW sells ~$1.1M of its own Bitcoin $BTC ETF; sells ~$12M of Coinbase $COIN; sells ~$10M of Block $XYZ; sells ~$1.1M of Robinhood $HOOD.

• Bitmine $BMNR now holds 566,776 Ethereum $ETH worth ~$2.1B; surpasses SharpLink $SBET to become the largest ETH holder.

• ⭐️ Joseph Chalom, former Head of Digital Assets Strategy at BlackRock $BLK, joins SharpLink $SBET as Co-CEO; Chalom helped launch $IBIT, $ETHA, & $BUIDL.

• Semler Scientific $SMLR buys an additional 175 Bitcoin $BTC for ~$20.8M at $119,230 per BTC; now holds 5,021 BTC worth ~$590M.

Security and Exploits

• Woo X exploited for ~$14M due to a team member's device being compromised; Woo X to cover affected users; offers 10% bounty to the attacker in return of remaining stolen funds.

• ICYMI Brave blocks Windows Recall feature; Brave signals Windows to exclude it from Recall’s screenshot capture logic.

• ICYMI Microsoft releases SharePoint security updates; patches actively exploited flaw targeting government agencies, banks, & more.

Token Unlocks

• AltLayer $ALT / ~$8M / July 25th
• Sahara AI $SAHARA / ~$8M / July 26th
• Sign $SIGN / ~$12M / July 28th
• Jupiter $JUP / ~$30M / July 28th
Sourced from Tokenomist

Funding

• ⭐️ Courtyard raises $30M in Series A funding led by Forerunner.

• Gaia raises $10M in Series A funding led by ByteTrade, Susquehanna, Mantle, & Mirana.

• Bloom raises $1.6M in Pre-Seed funding led by Faction.

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That’s it for today’s edition! See you soon.

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