U.S. Court Lifts OFAC’s Two-Year Sanction on Tornado Cash

A three-judge panel of the United States Court of Appeals for the Fifth Circuit has lifted a two-year sanction imposed by the Treasury Department on the crypto privacy protocol Tornado Cash. News of the ruling saw the protocol’s native token, TORN, skyrocket by as much as 500% to a local high of $34.96.

Big Victory for Tornado Cash

Tornado Cash is a privacy protocol that mixes on-chain transactions, enabling users to deposit using one wallet and withdraw with another wallet. This tool, which helps to facilitate anonymous transactions, is a primary tool bad actors use to transport ill-gotten funds to avoid being traced.

In August 2022, the U.S. Treasury Department sanctioned Tornado Cash over these concerns. The department explained that North Korea’s notorious hacking group Lazarus adopted the privacy protocol to launder over $7 billion. The Treasury charged its enforcement agency, the Office of Foreign Assets Control (OFAC), to administer the sanction.

Tornado Cash’s co-founders, Alexey Pertsev and Roman Storm, were arrested and face prison sentences. They were charged with participating in money laundering crimes.

In the latest court decision, the federal appeals court stressed that the Treasury overstepped its authority. The judges sided with six Tornado Cash users who argued that the protocol is not to face U.S. sanctions.

While agreeing that the department’s concerns are “undeniably legitimate,” the three-judge panel explained that “Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the ‘property’ of a foreign national or entity, meaning they cannot be blocked.”

Several crypto entities, such as Coinbase and Ethereum’s co-founder Vitalik Buterin, assisted the crypto mixer in attaining its latest legal victory.

According to MetaLawMan, the Treasury Department has 90 days to file a petition to the Supreme Court. He added that the department may decide to leave the call for Trump’s administration to make.

Meanwhile, Tornado Cash’s TORN saw a meteoric surge from $3.6 to $34.96 in less than two hours, fueled by the court decision. At press time, the asset exchanged hands with $15.5, representing a 337% increase in the past 24 hours.