A previous ruling by the Appeals Court determined that the Treasury Department had exceeded its authority by sanctioning the mixer.
A Texas court has overturned the sanctions against Tornado Cash, the cryptocurrency mixing protocol, in a ruling that could signal a shift toward more favorable regulation for privacy technologies in the digital asset space.
The case began in August 2022, when the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash, accusing it of facilitating money laundering by the North Korean hacking group Lazarus, which allegedly used the protocol to launder over $455 million in stolen digital assets.
The sanctions led to the arrest of developer Alexey Pertsev, who was sentenced on May 14, 2024, by the Appeals Court of ‘s-Hertogenbosch to five years and four months in prison for laundering $1.2 billion through the platform. Despite Tornado Cash’s recent legal victory, Pertsev remains in custody.
According to documents filed on January 21 with the U.S. District Court for the Western District of Texas, the judges ruled that OFAC’s sanctions must be lifted, and the case is to be sent back for further proceedings.
The decision follows an appeal filed by six Tornado Cash users on November 26, 2024. The appeal argued that OFAC had overstepped its mandate, contending that Tornado Cash’s immutable smart contracts cannot be considered “property” of a foreign entity or individual and therefore cannot be subject to sanctions under the IEEPA (International Emergency Economic Powers Act).
