A Texas court has overturned the sanctions against Tornado Cash, a cryptocurrency mixing protocol. This decision is a big win for privacy technologies in the crypto space.
Originally, the U.S. Treasury's Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in August 2022. They accused it of helping the North Korean Lazarus Group launder over $455 million in stolen digital assets.
The sanctions led to the arrest of Tornado Cash developer Alexey Pertsev. In May 2024, a Dutch court found him guilty of money laundering, sentencing him to five years and four months in prison for laundering $1.2 billion in illicit funds.
In a recent ruling, the U.S. District Court for the Western District of Texas reversed the OFAC sanctions. According to a court filing from January 21, the ruling stated: “It is ordered and adjudged that the judgment of the district court is reversed, and the cause is remanded to the district court for further proceedings in accordance with the opinion of this court.”
Even with this legal victory, Pertsev still remains in custody on money laundering charges. During his trial in March 2024, he argued that he shouldn’t be held responsible for how users misused the Tornado Cash protocol. The court disagreed, stating that Pertsev and his co-founders could have taken steps to prevent such misuse.
This ruling came after six Tornado Cash users appealed against the OFAC sanctions. Their appeal, filed on November 26, 2024, claimed that OFAC overstepped its authority by blacklisting Tornado Cash. They argued: “We hold that Tornado Cash’s immutable smart contracts are not the ‘property’ of a foreign national or entity, meaning they cannot be blocked under IEEPA.”
The plaintiffs also pointed out that blockchain transactions are traceable. This is why some crypto users seek more options for keeping their transactions private.
The sanctions raised serious concerns for developers focused on privacy technologies. Matthew Niemerg, co-founder and president of AlephZero, noted the importance of providing privacy features while remaining legally compliant.
For now, industry insiders are looking forward to more developments in Pertsev’s legal case after the OFAC sanctions were reversed.