Tornado Cash Upturns 500% as US Court Overturns Sanctions

A federal appeals court has ruled that US sanctions imposed on Tornado Cash must be lifted.

The ruling challenges the Treasury Department's use of sanctions to target technology that anonymizes crypto transactions and reverses an August district court ruling that labelled Tornado Cash a “notorious” crypto-mixing tool and upheld the government's stance against its service.

The Treasury claimed that Tornado Cash facilitates illicit activities, such as money laundering by groups like North Korea's Lazarus Group. However, the Court of Appeals found that its smart contracts are not property of any foreign national.

"Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the 'property' of a foreign national or entity," the Court of Appeals declared, stating the Treasury's Office of Foreign Assets Control "overstepped its congressionally defined authority." 

These smart contracts fall outside the scope of the International Emergency Economic Powers Act, the law under which the Treasury's Office of Foreign Assets Control (OFAC) sanctioned the service.

The court determined that OFAC had exceeded its authority by sanctioning Tornado Cash.

"We readily recognize the real-world downsides of certain uncontrollable technology falling outside of OFAC’s sanctioning authority," the judges said. "But we must uphold the statutory bargain struck (or mis-struck) by Congress, not tinker with it."

Paul Grewal, Coinbase's chief legal officer, celebrated the decision as a “historic win for crypto” on X.

"These smart contracts must now be removed from the sanctions list and U.S. persons will once again be allowed to use this privacy-protecting protocol," Grewal said. "Put another way, the government’s overreach will not stand."

Tornado Cash's TORN token surged more than 500% following the ruling to as high as $40.

However, Tornado Cash developer Roman Storm will proceed to trial in the US Department of Justice’s (DOJ) case against him.

District Judge Katherine Polk Failla of the Southern District of New York (SDNY) denied Storm's dismissal appeal of the charges against him.

Storm was charged in August 2023 alongside fellow Tornado Cash developer, Roman Semonov, for their work on the crypto mixer: conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business, and conspiracy to violate the International Emergency Powers Act.

Tornado Cash Developer Roman Storm’s Case Proceeds to Trial as Judge Denies Dismissal

Tornado Cash developer Roman Storm failed to convince the judge that being arrested for coding is akin to being arrested for speech

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The court's ruling against the sanctions should nonetheless impact Strom's case. "This is hugely good news for anyone developing privacy software and will likely have a positive impact on Roman Storm's trial, where it is debated whether the court may criminally charge the developers of software," explained one X user.

Storm himself tweeted, "My fight is not over yet, and I still lack resources" following the court's decision.