A U.S. District Court for the Western District of Texas reversed a previous ruling that supported sanctions imposed on the crypto mixer Tornado Cash. The decision has sent Tornado Cash’s native token, TORN, soaring over 140%, jumping from $9.5 to more than $23.
The initial sanctions were enacted by the Office of Foreign Assets Control (OFAC) in August 2022, targeting Tornado Cash for its alleged use by North Korea to launder stolen cryptocurrency. The sanctions also led to the arrest of developer Alexey Pertsev, who was sentenced to more than five years in prison.
However, the case took a turn after Tornado Cash user Joseph Van Loon and several other plaintiffs sued the U.S. Treasury, claiming that the agency exceeded its authority. They argued that Tornado Cash’s immutable smart contracts—a core feature of its decentralized system—cannot be classified as “property” under the International Emergency Economic Powers Act (IEEPA), which served as the basis for the sanctions.
The court also rejected the notion that Tornado Cash constitutes a service, pointing out that the lack of ongoing human effort in the operation of immutable smart contracts disqualifies them from being classified as such.
Legal challenges against Tornado Cash and its developers extended beyond the criminal cases. Crypto advocacy groups, including Coin Center and Coinbase-backed Tornado Cash users, filed lawsuits against the U.S. Treasury.
In November, an appellate court ruled that the U.S. Treasury’s Office of Foreign Assets Control (OFAC) overstepped its authority by sanctioning Tornado Cash’s immutable smart contracts, which cannot be controlled or altered by any individual or entity. However, the ruling did not impact the criminal cases.
Storm’s motion claims this ruling invalidates allegations of conspiring to violate the International Emergency Economic Powers Act (IEEPA), as the smart contracts do not constitute “property” subject to sanctions under the law. The appeals court added that Tornado Cash’s technology operates autonomously, making it impossible for its creators to prevent its use, even by sanctioned entities like North Korean hackers.
Storm’s motion follows a broader legal battle against OFAC’s actions, initiated by six Tornado Cash users with support from Coinbase. Although the case was initially dismissed, the appeals court reversed the decision in November 2023.
