Good morning. U.S. prosecutors charged two individuals allegedly behind decentralized cryptocurrency mixer Tornado Cash, saying they conspired to launder illicit funds and to violate U.S. sanctions.

The indictment, filed by the U.S. Attorney’s Office in the Southern District of New York and unsealed Wednesday, charged Roman Storm and Roman Semenov in connection with the alleged creation, operation and promotion of Tornado Cash, a platform that enables users to exchange cryptocurrencies with relative anonymity.

• The background: Tornado Cash was sanctioned by the U.S. Treasury Department last August. The U.S. accused it of laundering more than $1 billion in virtual currency, including hundreds of millions of dollars of hacking proceeds for the Lazarus Group, the sanctioned North Korean cybercrime organization.
   
• The allegations: Prosecutors alleged Storm and Semenov created the core functions of the Tornado Cash service, paid for the infrastructure needed to run the service and advertised the platform as providing untraceable and anonymous financial transactions. They made millions of dollars in profits from running Tornado Cash, prosecutors said.
   
• The defense: Storm, a 34-year-old from Auburn, Wash., was arrested Wednesday in Washington state. His lawyer, Brian Klein, a partner at law firm Waymaker, said Storm has been cooperating with the investigation since last year and contended that he wasn’t engaged in any criminal conduct.

SEC takes on private equity, hedge funds

Wall Street’s main regulator approved sweeping new rules aimed at overhauling the way private-equity and hedge funds deal with their investors, in the biggest regulatory challenge in more than a decade to firms such as Blackstone, Apollo Global Management and Citadel.

The Securities and Exchange Commission voted 3-2 on Wednesday to adopt new requirements for private funds, which manage more than $25 trillion in gross assets for pension plans, university endowments and wealthy individuals.

The rules restrict the ability of private-equity and hedge funds to entice large investors by offering them special deals, known as side letters, for better terms than other investors. The SEC will also require private funds to provide their investors quarterly financial statements detailing their performance and expenses, and to undergo annual audits.

• Congress and the White House are talking about regulating artificial intelligence, but courts might well decide some of the most economically significant questions about the booming technology.
   
• Wagner paramilitary group leader Yevgeny Prigozhin, who led a short-lived uprising that challenged Russian President Vladimir Putin’s authority in June, was killed in a plane crash Wednesday, according to Russian authorities. 

China, Russia deliver broadsides against West at Brics summit

Russia and China used a summit of countries known as the Brics this week to air their grievances against Western powers, present themselves as defenders of developing economies and set out the case for an alternative international order.

Russian President Vladimir Putin, addressing the South African summit by video, accused the West of provoking everything from the war in Ukraine and global inflation to hunger in the world’s most vulnerable countries by hampering Russian grain and fertilizer sales through sanctions.

• Iran, Saudi Arabia, Others Invited to Join Brics Group

• BlackRock’s recent performance in China is emblematic of other Wall Street titans whose dreams of riches made in the country appear to be slipping away. Deal flow for many American investment banks in China has slowed to a trickle with local companies increasingly turning to their Chinese peers. Meanwhile, a slowing Chinese economy and growing difficulty in securing data have damped foreign investors’ appetite for Chinese assets.
   
• Kyiv is devising a plan with global insurers to reopen a crucial grain-export route for vessels navigating the Black Sea, a shipping lane blockaded by Russia for the past month.
   
• James Bullard, who was the longest tenured of the 12 regional Federal Reserve Bank presidents when he stepped down last month as the head of the St. Louis Fed, thinks the U.S. economy faces new risks of stronger growth that could require higher interest rates to keep up the fight against inflation in the months ahead.

• India became the first country to land at the moon’s south pole—a logistically challenging achievement expected to kick off a new era of space exploration. It joins the U.S., China and Russia in successfully pulling off an uncrewed lunar landing.
   
• The large field of GOP presidential hopefuls gave Donald Trump what he wanted in their first debate: two hours of infighting and bickering and only brief criticism of the absent front-runner.
   
• The coalition representing Hollywood studios and streaming services made what it believes to be its best offer to striking writers Tuesday evening, releasing the terms of its latest contract in the hopes of persuading the Writers Guild of America to accept the deal.
   
• Russian authorities have requested an extension of the pretrial detention of Evan Gershkovich, the Wall Street Journal reporter deemed by the U.S. to be wrongfully held in Russia.
   
• The technology to remove carbon from the atmosphere is unproven at scale and the economics are just taking shape. What has become clear this year is that carbon removal is now the realm of giant companies and big government support.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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