The crypto mixing service aided the Lazarus Group, but a judge rules that’s not enough to condemn it
A US federal court has blocked the Treasury Department from reinstating sanctions against Tornado Cash, a crypto mixing service that had been accused of helping launder stolen digital assets. The decision, handed down on April 28 by Judge Robert Pitman in Austin, TX, marks a significant development in the ongoing legal battle over the government’s authority to regulate decentralized finance tools.
The Treasury’s Office of Foreign Assets Control (OFAC) initially sanctioned Tornado Cash in August 2022, arguing that the platform had been used by the North Korean Lazarus Group to move stolen funds. OFAC added Tornado Cash’s smart contract addresses to its Specially Designated Nationals (SDN) list, effectively banning US users from interacting with the platform.
However, the sanctions sparked immediate legal pushback. A group of Tornado Cash users, led by Joseph Van Loon, filed suit claiming that OFAC’s action was unlawful. They argued that the platform’s code was not a person or entity that could be legally sanctioned and that the agency’s move overstepped its authority.
Though the case originally went in favor of the Treasury, the Fifth Circuit Court of Appeals later reversed that decision and instructed the lower court to side with the plaintiffs. That led to Judge Pitman permanently blocking OFAC from enforcing or reimposing the sanctions.
The decision also comes amid wider tensions in the crypto space. On the same day as the ruling, the DeFi Education Fund sent a petition to the White House urging prosecutors to drop charges against Roman Storm, a co-founder of Tornado Cash. Storm faces accusations of laundering more than $1 billion in digital currency through the platform.
Critics argue that holding developers responsible for how others use open-source code could discourage innovation across the crypto industry. Storm’s trial is scheduled for July, and the outcome could have broader implications for software creators in the blockchain space.
