Key Takeaways
- The plaintiffs argued that the Treasury Department exceeded its authority by targeting decentralized, open-source code and not a specific individual or entity
- OFAC had sanctioned Tornado Cash in August 2022, accusing the crypto mixing service of aiding in laundering crypto stolen by the North Korean hacking group
A U.S. district court has ruled that the Office of Foreign Assets Control (OFAC) cannot reimpose sanctions on the crypto mixing service, Tornado Cash. The decision, issued by Judge Robert Pitman in the Western District of Texas, permanently enjoins OFAC from enforcing sanctions against the platform.
This development comes after OFAC formally removed Tornado Cash from its sanctions list on March 21, 2024, following a ruling by the U.S. Court of Appeals for the Fifth Circuit. Plaintiffs in the case, including Tornado Cash user Joseph Van Loon, challenged the legality of OFAC’s initial 2022 designation, which had added Tornado Cash’s smart contract addresses to its Specially Designated Nationals and Blocked Persons (SDN) list.
OFAC originally sanctioned the platform in August 2022, citing its alleged use by the North Korean state-sponsored hacking group Lazarus to launder stolen cryptocurrency. In total, OFAC accused Tornado Cash of helping move over $1 billion in illicit funds.
The plaintiffs argued that the Treasury Department exceeded its authority by targeting decentralized, open-source code and not a specific individual or entity. In response, a district court initially upheld the sanctions, but the Fifth Circuit later reversed the ruling, ordering summary judgment in favor of the plaintiffs. OFAC subsequently removed the designations but argued that the case no longer required a final court ruling.
Judge Pitman rejected this position. In his April 28 decision, he emphasized that OFAC’s removal of Tornado Cash from the SDN list did not guarantee that it wouldn’t re-list it in the future. The court stated that OFAC’s discretion to reimpose sanctions without a formal acknowledgment of the court ruling made the issue unresolved and justified a permanent injunction.
The Department of Justice, meanwhile, continues criminal proceedings related to Tornado Cash. Roman Storm and Roman Semenov, two developers linked to the platform, were indicted in 2023 for allegedly conspiring to commit money laundering and operate an unlicensed money transmission business. Semenov remains on the SDN list.
On April 28, the DeFi Education Fund submitted a petition urging the White House to reconsider the charges against Roman Storm, arguing that prosecuting developers for the actions of users could impact open-source software development in the U.S.
