U.S. District Court Officially Reverses Sanctions on Tornado Cash Mixer
A U.S. District Court ordered the OFAC to remove addresses associated with Tornado Cash from its Specially Designated National and Blocked Persons (SDN) list, following an Appeals Court ruling that the Treasury Department exceeded its authority in sanctioning the crypto mixer.
- The U.S. District Court in the Western District of Texas has ordered the overturning of an earlier ruling that backed sanctions against the cryptocurrency mixer Tornado Cash under the International Emergency Economic Powers Act (IEEPA).
"Contrary to the Department’s arguments, the immutable smart contracts are not services. So even when we consider OFAC’s regulatory definitions, the immutable smart contracts are not property because they are not ownable, not contracts, and not services," the document states.
- In August 2022, OFAC sanctioned Tornado Cash for its use by North Korea in cybercrime activities. Tornado Cash developer Alexey Pertsev was sentenced to over five years for money laundering in the Netherlands, while fellow developer Roman Storm is set to face trial in the United States.
- The key issue in the case involves the International Emergency Powers Act, allowing the President to any "property" in which a foreign country nation has an interest.
- The court stated that despite OFAC sanctions, Tornado Cash's immutable smart contracts remain accessible online and are not "ownable." The Appeals Court noted that while OFAC broadened the definition of property to include "contracts of any nature," immutable contracts don't qualify as they don't involve an agreement between multiple parties. With only one party involved, these smart contracts are not considered a service, countering another argument by the Treasury Department.
"IEEPA grants the President broad powers to regulate a variety of economic transactions, but its language is not limitless. Mending a statute’s blind spots or smoothing its disruptive effects falls outside our lane," the ruling reads, adding that "Legislating is
Congress’s job—and Congress’s alone."
- According to the US Department of Justice (DOJ), the sanctions reversal does not impact the trial against Roman Storm in the United States, while Storm is seeking to dismiss the charges based on the ruling.
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