Emily Walker
The US Court has rescinded the sanctions placed on the cryptocurrency mixer Tornado Cash by the Department of the Treasury’s Office of Foreign Assets Control (OFAC). This decision followed a ruling from the Court of Appeals in November, stating that OFAC had exceeded its authority.
A Significant Gain for Crypto Privacy
In a positive development for the cryptocurrency sector, the US District Court for the Western District of Texas reversed the OFAC sanctions on Tornado Cash on Monday. The sanctions were imposed over accusations of “facilitating” money laundering.
Tornado Cash was sanctioned in August 2022 for allegedly not implementing proper controls to prevent money laundering activities using its platform.
The US Treasury claimed that since 2019, Tornado Cash’s decentralized system had laundered over $7 billion in cryptocurrency, including $455 million connected to the North Korean hacking group, Lazarus Group.
On November 26, 2024, the Fifth Circuit Court of Appeals determined that OFAC had “overstepped its congressionally defined authority” in sanctioning the crypto mixer. As noted by Bitrabo, the court ruled that Tornado Cash’s smart contracts do not meet the definition of “property” under federal law, thus exempting them from the International Emergency Economic Powers Act (IEEPA).
The court’s filing dated January 21, 2025, stated, “It is ordered and adjudged that the judgment of the district court is reversed, and the cause is remanded to the district court for further proceedings in accordance with the opinion of this court.”
Peter Van Valkenburgh, an attorney and Executive Director at CoinCenter, explained that while the court’s decision was encouraging, it is not the final chapter. He noted that the recent rulings and remand to the district court could prevent a full review by the Circuit Court.
Nevertheless, Van Valkenburgh cautioned that the government may still seek to appeal to the Supreme Court, although he considers this action to be unlikely at this time, concluding that:
The District Court will still need to determine if the remedy is a nationwide vacatur (allowing all in the US to use immutable contracts) or a more restricted relief (where plaintiffs can use the contracts while others might need to pursue separate actions). We should advocate for the nationwide vacatur.
No One Left Behind
Vitalik Buterin, co-founder of Ethereum, expressed his support for the ruling, stating, “Tornado Cash itself won an important case today.” He has been a proponent of privacy in cryptocurrency and has discussed the usage of privacy protocols like Railgun, asserting that “Privacy is normal.”
Additionally, he referred to the recent pardon of Silk Road founder Ross Ulbricht, emphasizing that no individual should be “left behind,” implying that Tornado Cash’s co-founder Roman Storm and developer Alexey Pertsev should be next in line for justice.
After the OFAC sanctions, Pertsev was detained in the Netherlands in August 2022 and received a 5-year sentence for money laundering as ruled by the s-Hertogenbosch Court of Appeal in May 2024.
Meanwhile, Storm was arrested in Washington in August 2023, facing charges of money laundering and violations of sanctions. He has pleaded not guilty, with his trial delayed until April 2025.
Storm acknowledged Buterin’s support and gratitude for his and Pertsev’s assistance over the past two and a half years.
