U.S. Court Lifts Sanctions on Crypto Mixer Tornado Cash

The U.S. Court of Appeals overturned sanctions imposed on crypto mixer Tornado Cash by the Office of Foreign Assets Control (OFAC) and sent the case back for further review.

The Fifth Circuit Court of Appeals ruled against the OFAC’s sanctions on Tornado Cash, returning the case to the U.S. District Court for the Western District of Texas for further proceedings.

The court found that the OFAC overstepped its authority, as the application of the International Emergency Economic Powers Act (IEEPA) to block the crypto mixer was deemed unjustified.

According to the court’s decision, Tornado Cash’s immutable smart contracts operate autonomously, without control or modification even from the developers. Therefore, they don’t qualify as “property” subject to sanctions under IEEPA.

Despite this ruling, Tornado Cash developer Alexey Pertsev remains in custody in the Netherlands on money laundering charges. He was arrested in August 2022 and, on May 14, 2024, was found guilty of laundering $1.2 billion in illicit funds, receiving a prison sentence of five years and four months. His representatives filed an appeal.

The OFAC imposed sanctions on Tornado Cash in August 2022, accusing the protocol of facilitating the laundering of $455 million by the North Korean hacking group Lazarus Group. However, the decentralized smart contracts of the mixer remained accessible to users, as they’re technically impossible to block or modify, an aspect confirmed in the court’s new ruling.