Tornado Cash Sanctions Case Officially Dismissed
In a major development for crypto privacy advocates, the U.S. Treasury Department has formally ended its legal battle over Ethereum-based coin mixer Tornado Cash. This comes months after the department’s Office of Foreign Assets Control (OFAC) reversed its 2022 decision to sanction the platform, a move that had sparked intense backlash from the blockchain industry.
On Thursday, the U.S. Court of Appeals for the Eleventh Circuit granted a joint motion from the Treasury and advocacy group Coin Center to vacate the judgment and dismiss the appeal. The decision was made on the grounds that the case was now “moot”, following OFAC’s removal of Tornado Cash from the sanctions list in March.
Why the Government Backed Down
The court battle began when OFAC’s 2022 sanctions sparked a legal challenge over whether Tornado Cash’s smart contracts—immutable and autonomous code running on Ethereum—could even be considered “property” under sanction laws.
A Fifth Circuit judge ruled in November that the government had overstepped its authority, arguing that immutable smart contracts can’t be owned or modified and therefore don’t qualify as sanctionable property.
The government, meanwhile, had originally blacklisted Tornado Cash on grounds that it was used by North Korea’s Lazarus Group to launder billions of dollars in stolen crypto. But rather than defend its sweeping interpretation of sanctions laws in court, the Treasury has now opted to quietly walk away from the legal fight.
Legal Pressure Remains for Tornado Developers
While the sanctions fight may be over, the legal fallout is far from resolved for Tornado Cash’s developers.
Roman Storm, one of Tornado Cash’s co-founders, is still facing prosecution in New York, with his trial set to begin next week. If convicted on all charges, the 35-year-old developer could face up to 45 years in prison.
Meanwhile, Tornado developer Alexey Pertsev, who faced similar charges in the Netherlands, was convicted last year and sentenced to 64 months in prison. He was released under supervision in February.
The charges center on money laundering, not sanctions violations, with prosecutors arguing that the developers knowingly enabled illicit finance via Tornado’s privacy-preserving protocols.
Free Speech vs National Security
The Tornado Cash saga has become a flashpoint for the crypto industry, especially around the intersection of code, privacy, and regulation.
Critics argue the government’s actions amounted to punishing developers for writing open-source software, which should be protected as free speech. But courts have largely rejected that defense, with a Manhattan judge ruling that the First Amendment doesn’t shield developers from liability when their code is used for criminal ends.
While the broader regulatory war over crypto privacy tools is still far from settled, this latest court development signals that even the government recognizes the limits of its current legal toolkit.
