Federal Court Bars Treasury from Re-Sanctioning Tornado Cash: Details

A federal court in Austin, Texas has ruled that the Office of Foreign Assets Control (OFAC) cannot reinstate sanctions on crypto mixer Tornado Cash. 

The judgment, handed down by Judge Robert Pitman on April 28, declares the initial sanctions unlawful and permanently blocks the Treasury from enforcing them again.

Court Overturns Treasury’s Attempt

This development stems from a lawsuit filed by a group of Tornado Cash users, led by Joseph Van Loon, who challenged OFAC’s 2022 decision to block Tornado Cash smart contracts by placing them on the Specially Designated Nationals and Blocked Persons (SDN) list. The plaintiffs argued that OFAC had overstepped its authority by targeting autonomous software protocols rather than identifiable individuals or entities.

OFAC had accused Tornado Cash of facilitating money laundering by the North Korean hacking group Lazarus, and had used those claims as justification for its sweeping sanctions. However, the court disagreed with the agency’s legal basis, with the Fifth Circuit later overturning an earlier decision that favored the Treasury. 

The case culminated in this week’s ruling, which affirms that smart contracts, as immutable pieces of code, do not meet the criteria for sanctionable “property” under U.S. law.

DOJ Faces Pressure to Drop Charges Against Tornado Developer

While the sanctions battle appears to be over, the legal fight surrounding Tornado Cash is far from settled. On the same day as the court’s ruling, the DeFi Education Fund publicly also urged David Sacks to pressure the Department of Justice into dropping charges against Tornado Cash co-founder Roman Storm.

Storm, who is set to go to trial in July, was arrested in 2023 on allegations of aiding the laundering of over $1 billion through Tornado Cash. The charges have further sparked outrage in the crypto community, where many argue that developers should not be held liable for how users interact with open-source code.

“This prosecution attempts to criminalize software development itself,” the DeFi Education Fund stated. “If allowed to stand, it could chill innovation and drive talent out of the United States.”

The ruling not only deals a setback to OFAC but also raises deeper questions about the future of crypto regulation, privacy tools, and the boundaries of legal liability in the age of decentralized technology.