Tornado Cash Secures Legal Victory Against U.S. Sanctions

In a significant ruling for the crypto industry, a federal judge in Texas has barred the U.S. government from re-imposing sanctions on Tornado Cash, a privacy-focused protocol that has been at the center of a contentious legal battle. The decision marks a pivotal moment for Ethereum developer Joseph Van Loon and five other Tornado Cash users who challenged the U.S. Department of the Treasury’s authority to sanction the protocol. This ruling reinforces a November 2024 appellate court decision that found the Treasury’s initial sanctions, imposed in 2022, overstepped legal boundaries.

The legal saga began when the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, alleging the protocol laundered $7 billion in cryptocurrencies, including $455 million linked to the North Korea-backed Lazarus Group. OFAC claimed the mixer facilitated illicit activities, including funding North Korea’s nuclear weapons program. In response, Van Loon and his co-plaintiffs filed a lawsuit in September 2022, arguing that sanctioning a decentralized software tool like Tornado Cash was an unconstitutional overreach. Their case gained traction when a New Orleans appeals court ruled in November 2024 that the national security law cited by OFAC did not apply to immutable smart contracts, which form the backbone of Tornado Cash.

Court Rejects Government’s Position

The Treasury Department had removed Tornado Cash from its sanctions list in March 2025, citing evolving legal and technological considerations. However, the agency maintained that it could re-sanction the protocol at its discretion, prompting Van Loon’s team to seek a permanent injunction. Government lawyers argued that delisting the protocol resolved the plaintiffs’ concerns, rendering further court action unnecessary. Judge Robert Pitman disagreed, siding with the plaintiffs’ assertion that a clear guarantee against future sanctions was essential. This ruling not only upholds the appellate court’s findings but also sets a precedent for how decentralized technologies are treated under U.S. law.

The decision has been hailed as a landmark for crypto privacy. Presto, a cryptocurrency research firm, noted in a recent market brief that the ruling’s implications for the industry are profound, as it clarifies the legal limits of sanctioning autonomous software. However, the victory is bittersweet for Tornado Cash’s developers. Co-founder Roman Storm faces money laundering charges in a New York trial scheduled for July 2025, while Roman Semenov remains a fugitive wanted by U.S. authorities. Additionally, developer Alexey Pertsev is appealing a money laundering conviction in the Netherlands.