The U.S. federal court has permanently barred the Office of Foreign Assets Control (OFAC) from reimposing sanctions on Tornado Cash, a crypto mixing service. The ruling, issued on April 28 by Austin federal court judge Robert Pitman, could set a significant precedent in determining whether open-source crypto protocols can be held liable for how their tools are used.
Background of the Tornado Cash Case
The legal dispute began in August 2022, when the U.S. Treasury sanctioned Tornado Cash, accusing it of enabling the North Korean hacker group Lazarus to launder stolen crypto assets. Tornado Cash challenged the sanctions in court, arguing that developers shouldn’t be penalized for how their code is used by others.
In March, OFAC removed Tornado Cash from the sanctions list, but the platform continued its legal battle to clear its name and fight broader regulatory overreach.
Timeline of Court Decisions
Initially, a lower court sided with the U.S. Treasury, strengthening the government’s stance. However, that decision was later overturned by the Fifth Circuit Court, marking a turning point in the case. The final ruling by Judge Pitman reinforced that OFAC cannot impose sanctions on the protocol itself.
Legal Troubles Continue for Co-founder
Despite the court ruling in favor of Tornado Cash, legal troubles persist for its co-founder, Roman Storm. In August 2023, he was charged with laundering over $1 billion through the platform. His next hearing is set for July 2025.
On the same day as the favorable court ruling, the DeFi Education Fund urged the White House to drop the charges against Storm, warning that holding developers accountable for code misuse could hinder innovation in the U.S. crypto space.
FAQ
The court ruled that the sanctions unlawfully targeted open-source software not controlled by any single entity.
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