Court Bars US from Reimposing Tornado Cash Sanctions

A federal court in Texas has ruled that the US Treasury Department’s Office of Foreign Assets Control (OFAC) cannot reimpose or restore sanctions against Tornado Cash, a cryptocurrency mixing service. Judge Robert Pitman stated that OFAC’s previous sanctions on Tornado Cash were unlawful and that they are permanently barred from enforcing such sanctions again. The case was initiated by Tornado Cash users, led by Joseph Van Loon, who argued that adding the platform’s smart contract addresses to the Specially Designated Nationals and Blocked Persons list was illegal. OFAC had initially sanctioned Tornado Cash in August 2022, accusing it of aiding in laundering stolen cryptocurrency linked to North Korea’s Lazarus Group. However, the platform was removed from the sanctions list in March 2023, after a court ruling in favor of Tornado Cash earlier that year. The recent ruling prevents OFAC from re-listing Tornado Cash or enforcing sanctions against it again.

Initially, the court had sided with the Treasury, but this decision was later reversed by the Fifth Circuit Court, which directed the lower court to grant partial summary judgment in favor of the plaintiffs, resulting in the revocation of the sanctions. In March, the Treasury claimed that a final court judgment was unnecessary. Additionally, on April 28, the DeFi Education Fund petitioned the White House to have prosecutors drop charges against Tornado Cash co-founder Roman Storm, who faces charges of laundering over $1 billion in crypto. The group argued that prosecuting developers for how others use their software sets a dangerous precedent and could hinder innovation in the US crypto industry.