He said the firm invested in PepperSec in August 2020 after securing an independent legal opinion that confirmed Tornado Cash, as designed, complied with federal guidance issued by the Financial Crimes Enforcement Network (FinCEN) in 2019.
Qureshi further stated that Dragonfly believed strongly in supporting open-source privacy-preserving technologies and continues to stand by that investment.
Qureshi said that Dragonfly neither operated Tornado Cash nor had any contact with illicit users, emphasizing that it offered PepperSec the same level of guidance it provides to all portfolio companies.
He also revealed that the firm fully complied with a Department of Justice subpoena issued in 2023 and was told it is not a direct target of the ongoing investigation.
According to Qureshi, the government’s mention of Dragonfly during a recent court proceeding was an attempt to weaken Tornado Cash’s defense, potentially by complicating testimony from Dragonfly co-founder Tom Schmidt.
He argued that prosecuting an investor over the conduct of a portfolio company years after the fact would have a chilling effect on venture funding for privacy technologies and blockchain innovation.
Dragonfly’s statement comes amid heightened enforcement efforts against crypto privacy tools, which regulators view as a growing risk for illicit finance. The firm said it remains confident that the DOJ will not pursue charges, but it pledged to “vigorously defend” itself if necessary.
