Cryptocurrency mixer Tornado Cash has been acquitted of OFAC sanctions by a US court
A Texas court has overturned sanctions imposed on cryptocurrency mixing company Tornado Cash over its role in facilitating money laundering.
The U.S. District Court for the Western District of Texas vacated sanctions imposed by the Treasury Department’s Office of Foreign Assets Control (OFAC) on Tornado Cash, concluding that its initial ruling did not comply with legal standards. January 21 Deposit He said:
“It is ordered and ordered that the judgment of the district court be vacated, and the case remanded to the district court for further proceedings in accordance with the opinion of this court.”
The latest order follows a ruling by the court on November 26, in which it determined that OFAC had exceeded its authority under the International Emergency Economic Powers Act (IEEPA).
The court found that Tornado Cash’s immutable smart contracts did not qualify as “property” subject to forfeiture and that penalties were improperly applied to the decentralized protocol.
Six Tornado Cash users filed an appeal against OFAC sanctions in April 2023 in an attempt to overturn the sanctions imposed on the cryptocurrency mixer.
They claimed that Tornado Cash’s smart contracts were made immutable through a “trusted onboarding ceremony” performed in May 2020.
This coding process included contributions from over 1,000 participants to finalize parameters, ensuring that contracts could not be updated or modified.
Subsequently, management of the protocol was transferred to the Tornado Cash community via the TORN token.
In its November ruling, the court rejected OFAC’s interpretation of IEEPA, adding that OFAC “exceeded its congressionally mandated authority” and added that “legislation is the job of Congress — and Congress alone.”
Legal history of Tornado Cash Company
Tornado Cash was sanctioned in 2022 after US regulators discovered that the platform was being used by the nefarious North Korean state-backed hacking group Lazarus to launder approximately $455 million in stolen assets.
Investigations following the sanctions led to the arrest of Roman Storm, co-founder of Tornado Cash, in August 2023, while developers Alexei Burtsev and Roman Semenov were detained.
The three were charged with criminal conspiracy and money laundering exceeding $7 billion.
In May 2024, Burtsev was convicted of laundering $1.2 billion and sentenced to five years in prison. His request for bail was rejected when he appealed the ruling.
As of press time, Pritsev remains in custody on money laundering charges.
Over the years, Burtsev and other Tornado Cash developers have received support from prominent names such as Ethereum co-founder Vitalik Buterin, who has donated funds to their legal defense.
Advocacy groups such as the Coin Center, Blockchain Association, and DeFi Education Fund have also backed them, while cryptocurrency exchange Coinbase financially supported the case against the Treasury Department’s action.
Bad actors continue to use Tornado Cash
Despite the sanctions, Tornado Cash remains a preferred channel for bad actors to launder loot.
According to Glocal Ledger, more than $552 million in illicit theft was transferred through the privacy tool between January and November 2024.
In November last year, several members of the US House of Representatives raised concerns about the continued use of the platform by criminals, urging the Treasury Department to take immediate action.
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