The Federal Appeal in the USA made a solution, which may become significant for the entire cryptocurrency industry. The US Department of Finance, according to the court, exceeded its powers by imposing sanctions on the Tornado Cash cryptocurrency mixer. This happened after the North Korean hacker group Lazarus used the service for laundering more than $455 million. However, the judges concluded that the software itself does not fall under the law on sanctions.
The decision was made by the Trekhoudei College of the 5th District Court of Appeal of the United States in New Orleans. Six Tornado Cash users were involved in the case, arguing that the software cannot be subject to sanctions, unlike individuals and organizations using it for illicit activities. Coinbase, the largest cryptocurrency exchange in the United States, actively supported the plaintiffs, organizing and partially financing the trial.
Judge Don Willett, representing the board’s opinion, acknowledged that the government’s concerns about Tornado Cash being used for money laundering are valid. However, the law passed during the Jimmy Carter era restricts the Department of Finance’s authority to impose sanctions only on property, not on technology.
“Perhaps Congress will update this law to encompass modern technologies like cryptocurrency mixers. But until then, we believe the unaltered Tornado Cash smart contracts do not belong to foreign individuals or organizations and therefore cannot be blocked,” said Judge Willett.
Following the announcement of the verdict, the price of Torn Tolen, associated with Tornado Cash, surged by 450%, according to coingeco.
In 2022, the US Treasury Department imposed sanctions against Tornado Cash, citing over $7 billion in cryptocurrencies being laundered through the service since its inception. Of the total, $455 million was linked to the North Korean hacker group Lazarus.
However, one of the developers of Tornado Cash, Alexei Pertsev, met a different fate. In May 2024, a court in the Netherlands sentenced him to five years and four months in prison for involvement in laundering more than $2 billion. Pertsev has expressed his intention to appeal.
Despite the sanctions, Tornado Cash began to recover in early 2024. While monthly deposits plummeted by 90% in 2022, the protocol attracted over $1.8 billion in the first half of 2024, as reported by the analytics company Flipside Crypto.
The chief lawyer of Coinbase, Paul, praised the court’s decision, calling it a “privacy victory.” He stated that the Ministry of Finance exceeded its authority by imposing sanctions and blocking open-source code due to a small