In the previous month, the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department removed Tornado Cash from its sanctions list, following a ruling from an appellate court that stated the agency could not classify the mixer’s smart contracts as subjects of its sanctions.
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The Overview
In November 2024, a panel from the Fifth Circuit Court of Appeals determined that the Treasury Department’s Office of Foreign Assets Control (OFAC) was not authorized to impose sanctions on the smart contracts associated with the crypto mixer Tornado Cash. Last month, OFAC completely delisted Tornado Cash, yet it kept developer Roman Semenov on its Specially Designated Nationals list.
Significance
The debate over whether Tornado Cash could be sanctioned at all is a contentious issue within the crypto industry. The ruling from the Fifth Circuit led to an increase in the value of the TORN token and ignited optimism that the U.S. government would face more challenges in hindering legitimate usages of mixers.
Analysis
The delisting of Tornado Cash included its smart contract addresses and other mixer components, aligning with the November judgment. This action may have been a strategy to avoid a court ruling mandating a permanent delisting of Tornado Cash by OFAC.
To provide some context: A collection of developers challenged OFAC after Tornado Cash was initially sanctioned, with support from a crypto exchange. This case, Van Loon v. Treasury, saw an initial ruling favoring the Treasury Department. However, upon appeal, the Fifth Circuit ruled — rather narrowly — that smart contracts did not fall under OFAC’s jurisdiction, referring the case back to the district court for further actions.
On March 21, the same day it delisted Tornado Cash, OFAC filed a notice with the court declaring that the case was now moot as a consequence of the delisting.
Peter Van Valkenburgh, the executive director at a leading crypto advocacy organization, commented that the November ruling left OFAC with limited options.
“They could have waited for the court to nullify the sanctions or they could have opted to delist them voluntarily, and they chose the latter,” he remarked. “This can be interpreted in two ways. One could see it as an attempt to maintain some flexibility to engage in future litigation regarding other listings, which is quite challenging given the Fifth Circuit’s unfavorable ruling for them.”
Alternatively, he suggested, OFAC might have been motivated by a desire for a quick resolution.
Leah Moushey, an attorney with a prestigious law firm, noted that the court may reject OFAC’s recent filing given that uncertainties remain regarding the potential re-designation of Tornado Cash in the future. She referenced a Supreme Court case that bore similarities in context.
In that case, FBI v. Fikre, the court determined that the U.S. government had not adequately demonstrated that the mere removal of an individual from a no-fly list would prevent them from being placed back on it in the future.
Thus, OFAC may need to substantiate that Tornado Cash cannot be designated again.
Another important question surrounding Tornado Cash is whether the recent delisting impacts the U.S. Department of Justice’s ongoing criminal case against developer Roman Storm. After the Fifth Circuit’s ruling, Storm’s legal team filed a motion to have the indictment dismissed, but the judge ruled that the proceedings should continue.
“The judge concluded that the conduct in question extended beyond mere interactions with the smart contract,” Moushey elaborated. The Fifth Circuit’s judgment did not remark on Tornado Cash as an entity.
Van Valkenburgh pointed out that OFAC has retained its sanctions against Semenov, indicating that the DOJ will persist in its efforts to argue that Storm conspired to breach these sanctions.
The upcoming trial for the Storm case is slated for July.
Wednesday
- 14:00 UTC (10:00 a.m. ET) The House Financial Services Committee conducted a markup session on the STABLE Act, Financial Technology Protection Act, and the CBDC Anti-Surveillance State Act, passing all three bills after a full day dedicated to addressing approximately 40 different proposed amendments.
Thursday
- 14:00 UTC (10:00 a.m. ET) The Senate Banking Committee voted to move forward with the nominations of Securities and Exchange Commission Chair Paul Atkins and Comptroller Jonathan Gould.
- (404 Media) T-Mobile introduced a GPS tracker for parents to monitor their children. A report from 404 Media indicated that some parents were unable to track their own kids but ended up receiving location data for other children instead.
- (The New York Times) A Ponzi scheme was uncovered that had employed crypto promises, trapping numerous individuals in an Argentinian town. Such scams are increasingly prevalent.
- (The Atlantic) A recent court filing by the Trump administration revealed that a person with protected legal status had been sent to a prison camp in El Salvador due to an “administrative error” without a hearing. A federal judge instructed the administration to bring him back to the U.S. on Friday, while White House Press Secretary Karoline Leavitt commented that “we are unaware of the judge having jurisdiction or authority over the country of El Salvador.”
- (The Wall Street Journal) New Jersey’s Cory Booker set a U.S. Senate record for the longest floor speech, delivering a marathon address lasting 25 hours in protest of President Donald Trump’s policies.
- (The New York Times) Donald Trump announced a series of tariffs on multiple nations, asserting they were retaliatory against tariffs from the U.S.’s trading partners. “The markets are going to boom,” Trump stated.
- (Yahoo! Finance) Following a tumultuous Thursday, the financial markets faced another steep decline on Friday.
- (Wired) One of the countries affected by the U.S. tariffs is the Heard and McDonald Islands, which are uninhabited and do not have any export activities.
- (ABC News) The White House reported that its tariff rate imposed on individual nations was half of those nations’ corresponding tariff rates against the U.S. Economists indicated that the calculations were made by dividing a country’s trade deficit by its import value and then halving it, ABC News highlighted.
- (Reuters) The reimplementation of tariffs appears to have elevated the risks of a recession, as indicated by a report from J.P. Morgan.
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