The US Treasury Department announced on March 21 that it has removed the cryptocurrency mixer Tornado Cash from its sanctions list.
This decision comes in the wake of a ruling by a US appeals court in January, which determined that the Treasury’s Office of Foreign Assets Control (OFAC) does not have the authority to sanction Tornado’s smart contracts, as they do not belong to any foreign individual or entity.
The January ruling stated, “Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the ‘property’ of a foreign national or entity, indicating that […] OFAC exceeded its legislatively defined powers.”
In a statement issued on March 21, the Treasury confirmed that OFAC has removed a number of smart contract addresses linked to Tornado from its sanctions list on the Ethereum blockchain.
Following the news, Tornado’s native token, TORN, experienced a spike of approximately 60%, as reported by CoinMarketCap. As of March 21, TORN’s market capitalization was around $73 million, with a fully diluted valuation of nearly $140 million.
OFAC is tasked with administering economic and trade sanctions against nations and foreign individuals.
Tornado Cash allows users to combine their cryptocurrency deposits into a mixer and then withdraw them to different wallet addresses later, which makes tracing the original funding source challenging.
#### Allegations of Money Laundering
In August 2022, OFAC sanctioned Tornado Cash, alleging that the blockchain protocol facilitated the laundering of cryptocurrency stolen by the Lazarus Group, a North Korean hacking organization.
The Lazarus Group is reported to have stolen billions of dollars in cryptocurrency through various cyber assaults. In February, they were accused of stealing $1.4 billion from the digital asset exchange Bybit, marking one of the largest crypto exploits to date.
Since its inception in 2019, Tornado Cash is alleged to have assisted in the laundering of over $7 billion in illicit funds, according to the US Treasury.
In 2024, a Dutch court convicted Alexey Pertsev, one of Tornado Cash’s developers, of money laundering and sentenced him to 64 months in prison. In February, Pertsev was released to house arrest while he prepares to appeal his conviction.
The Ethereum Foundation has pledged to donate $1.25 million to support Pertsev’s defense efforts. “Privacy is normal, and writing code is not a crime,” the Foundation stated in a post on X while announcing the contribution on February 26.