The United States District Court for the Western District of Texas has reversed sanctions previously imposed on Tornado Cash, a cryptocurrency mixing service.
This decision follows a long-standing legal battle over the protocol’s role in preserving user privacy and the regulatory boundaries of oversight.
In August 2022, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash for allegedly aiding North Korea’s Lazarus Group in laundering $455 million in stolen funds.
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The sanctions triggered widespread controversy, leading to a November 2024 lawsuit submitted by six Tornado Cash users. They argued that OFAC overstepped its authority by targeting the protocol, which does not directly control or hold user funds. The users also emphasized that many rely on such tools to maintain financial privacy.
The court’s January 21 filing ordered the previous judgment to be reversed and returned for further review. It states:
It is ordered and adjudged that the judgment of the district court is reversed, and the cause is remanded to the district court for further proceedings in accordance with the opinion of this court.
Meanwhile, Alexey Pertsev, a developer of Tornado Cash, remains in custody in the Netherlands. He was convicted of laundering $1.2 billion worth of funds and sentenced to over five years in prison in May 2024.
Pertsev argued that he could not be held responsible for how users chose to utilize the tool. However, Dutch courts ruled that stronger safeguards should have been implemented to prevent misuse by bad actors.
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