Legal Report: Dutch Court Finds Crypto App Developer Guilty of Money Laundering
Security Management's Legal Report is a monthly column that highlights the instances where legal matters intersect with the security industry. The SM team tracks court cases, new and developing legislation, and regulatory decisions or investigations that affect private organizations and security professionals worldwide. To share a tip or notify Security Management about emerging legal issues, email Associate Editor Sara Mosqueda at [email protected].
Judicial Decisions
Australia
Whistleblowers. The Supreme Court sentenced a former Australian Army lawyer to five years and eight months in prison for leaking information about alleged war crimes, including illegal killings, committed by Australian soldiers in Afghanistan.
David McBride, who will be eligible for parole in 2026, leaked classified military files to journalists. The information was used in a series of articles, “The Afghan Files,” published by Australian public broadcaster ABC.
McBride pled guilty to three charges, including sharing classified documents and theft, but maintained that he did not believe he was breaking the law. Justice David Mossop, however, determined that McBride lacked any display of remorse and his actions were aggravated given his high security clearance. (The Queen v. David William McBride, The Supreme Court of the Australian Capital Territory, No. SCC 127 of 2019, 2024)
The Netherlands
Money laundering. A panel of judges in the East Brabant District Court convicted Alexey Pertsev on money laundering charges, sentencing him to more than five years in prison.
Pertsev co-developed and founded Tornado Cash, a crypto anonymizing tool. The court found that Tornado Cash allowed criminals and terrorists to launder $1.2 billion in stolen cryptocurrency.
“Tornado Cash makes a complete anonymous deposit and withdrawal possible from Tornado Cash, thereby concealing or disguising the person who has the actual control over the cryptocurrency; in other words: who owns the cryptocurrency,” the court said in a statement.
Tornado Cash and similar apps are advertised to improve the privacy of crypto users. Multiple countries sanctioned the app—including the United States—in 2022 for its involvement in laundering part of $600 million in virtual currency stolen by North Korean hackers.
In Pertsev’s case, prosecutors argued that the activity went beyond the right to privacy and that Pertsev deliberately ignored indications of criminal activity. The court determined that the platform lacked any barriers for people who wanted to use Tornado Cash for money laundering and that Pertsey knew the platform was being used for this purpose.
Along with the prison sentence of five years and four months, the court ruled that seized items, including a Porsche and cryptocurrency worth €1.9 million ($2.1 million), will not be returned to Pertsev. (The Netherlands v. Alexey Pertsev, East Brabant District Court, No. 82/198261-22, 2024)
United States
Extortion. The U.S. Supreme Court declined to take up an appeal regarding former attorney Michael Avenatti, leaving in place a federal appeals court’s decision to uphold Avenatti’s 2020 conviction of attempted extortion.
In February 2020, Avenatti was found guilty of trying to extort up to $25 million from athletic gear company Nike. He was sentenced to 30 months in prison for demanding payment from Nike in return for not revealing allegedly corrupt payments that the company was making to college basketball recruits’ families. At the time, Avenatti represented youth basketball coach Gary Franklin, Sr.
Avenatti previously appealed to the 2nd U.S. Circuit Court of Appeals, claiming that the 2020 conviction was based on insufficient evidence. The appeals court rejected the argument. (Michael Avenatti v. United States of America, 2nd U.S. Circuit Court of Appeals, No. 21-1778, 2024)
Negligence. A New Hampshire jury found the U.S. state liable for abuse that occurred at a state-run youth detention center. The jury awarded $38 million to a man who was held at the center as a teenager, where he was beaten, raped, and held in solitary confinement.
David Meehan alerted the police about the abuse in 2017 and filed a civil suit against the state in 2020. An investigation into allegations resulted in the arrests of 11 former state employees and additional lawsuits from more than 1,100 former residents of the facility. Collectively, the other lawsuits also claim incidents of emotional, physical, and sexual abuse during the course of 60 years. Meehan’s lawsuit was the first to go to trial.
The jury awarded Meehan $19 million in compensatory damages and another $20 million in enhanced damages. But Meehan will only receive $475,000 in damages total due to a New Hampshire law that caps damages; the amount was also reduced because the jury only found the state’s Department of Health and Human Service negligent on one incident.
Meehan’s attorney told the Associated Press that they plan to appeal to the state’s supreme court, which will determine the damages amount. (David Meehan, et al., v. State of New Hampshire, Department of Health and Human Services, Merrimack County Superior Court, No. 217-2020-cv-0026, 2024)
Legislation
U.S. States
School security. Tennessee Governor Bill Lee signed SB 1325 into law, which allows teachers and staff for K-12 public schools to carry concealed handguns while on school property.
Now known as Public Chapter 801, the law will require those who want to carry a firearm to complete 40 hours of training and obtain approval from the school district’s director of schools, the principal, and the local law enforcement agency chief. Staff who have a concealed handgun will not be identified to parents or most other staff and will be allowed to have the weapon—or weapons—in the classroom.
The law does not include a safe storage requirement, but it does require criminal and mental health background checks.
Climate. Vermont became the first U.S. state to require oil and gas companies to pay to address damages created by excess contributions of greenhouse gas emissions. On 30 May, Governor Phillip Scott allowed the Climate Superfund Act (S.259) to become law without his signature.
Vermont’s Climate Action Office of the Agency of Natural Resources will manage a climate cost recovery program and oversee the collection of payments from fossil fuel companies. The agency will be tasked with assigning financial liability for climate-related impacts caused by oil and gas companies that generated more than 1 billion metric tons of covered greenhouse gas emissions between 1 January 1995 and 31 December 2024. The state treasure will determine the extent of the damages.
The payments made into the Climate Superfund Cost Recovery Program will fund climate change adaptive or resilience infrastructure programs.
European Union
Supply chain. EU member countries agreed to a law that will force companies to uphold environmental and human rights standards in their supply chains.
The Corporate Sustainability Due Diligence law will enter into force in 2029. Large companies active in the EU will now be required to check whether their supply chains use forced or child labor or are responsible for environmental damage, like deforestation. Companies that identify these concerns within their supply chains must remedy the issue. Under the new law, fineable offenses can be as high as 5 percent of a company’s global earnings.
Companies subject to the law include those with more than 1,000 employees and global net turnover of more than €450 million ($489.8 million).
Regulations
United States
Discrimination. An IT-staffing firm will pay $31,000 total to 31 people who lodged a complaint about a job posting that publicly included race and citizenship requirements as part of a settlement with the U.S. Department of Justice. The firm, Arthur Grand Technologies, will also have to pay a civil penalty of $7,500.
The company has publicly denied any fault, alleging that the posting—which called for “only born U.S. citizens [white]”—was made without the company’s authorization by a disgruntled employee who wanted to embarrass the firm.
Along with the monetary aspects of the settlement, the firm will provide workplace-specific training for employees involved in recruiting and selecting candidates for employment, revise employment policies, and be monitored for compliance with anti-discrimination laws.
Railway safety. The U.S. Department of Justice and the Environmental Protection Agency (EPA) reached a $310 million settlement agreement with railway company Norfolk Southern over the derailment of a train in East Palestine, Ohio.
The company will pay an estimated $235 million for past and future cleanup efforts and a $15 million penalty for alleged violations of the Clean Water Act, the maximum fine permitted under the law. The cleanup, which was conducted by the EPA, dealt with contaminated air, water, and soil—polluted by toxic fumes from the crash.
After the train derailed on 3 February 2023, emergency responders burned five of the train cars that were carrying vinyl chloride, a carcinogenic chemical used to produce plastic, to avoid an uncontrolled explosion. However, the controlled burn created toxic fumes that spread across the area, generating concerns about long-term impacts to residents’ health.
Under the settlement, Norfolk Southern agreed to pay $25 million for a 20-year community health program that will provide medical monitoring and mental health services for qualified residents and first responders. The company will also pay $15 million for long-term monitoring of groundwater and surface water for 10 years, another $15 million for private drinking well water monitoring, and an estimated $6 million for a waterways’ remediation plan.
The agreement is pending final court approval. (United States v. Norfolk Southern Railway Company, U.S. District Court for the Northern District of Ohio Eastern Division, No. 23-cv-517, 2024)
Also of Interest
Security Management tracks emerging court cases, bills, laws, and regulatory issues that affect the security industry. Here are some of the developing stories that we are following.
Civil Liberties. Georgia’s president vetoed a controversial “foreign agent” law, which critics argued could be used to threaten civil liberties. Under the proposed law, independent media outlets and NGOs that receive more than 20 percent of funding from foreign donors would have been forced to register as organizations that support the interests of a foreign power.
Election tampering. A Louisiana political consultant was charged with 13 counts of felony voter suppression and 13 counts of misdemeanor impersonation of a candidate for his alleged involvement with a robocall that imitated U.S. President Joe Biden.
Extremism. A court in Munster, Germany, determined that the far-right political party Alternative for Germany is suspected of extremism, allowing intelligence services to continue monitoring the group’s actions and communications.
Hate crimes. New York City resident Skiboky Stora was charged with hate crimes for allegedly targeting and assaulting women and others he believed were white or Jewish.
National security. In Hong Kong’s biggest case involving pro-democracy activists, 14 people were found guilty of subversion under the National Security Law. The defendants were part of a larger group of 47 people accused of attempting to overthrow Hong Kong’s government by organizing an unofficial primary election in 2020.
Wrongful incarceration. After having his murder conviction vacated, Darien Harris filed a civil rights lawsuit against the city of Chicago, the Chicago Police Department, and seven police officers for their handling of the investigation. Harris served 12 years in prison for murder because of prosecutors’ use of faulty evidence, including an eyewitness account of a man who was declared legally blind, during the trial to convict him.
