US Court Upholds Sanctions on Tornado Cash

US District Judge Dismisses Appeal Seeking to Lift Sanctions on Tornado Cash

US District Judge Robert Pitman has dismissed an appeal filed by six Tornado Cash users who sought to lift sanctions placed on the controversial cryptocurrency mixer.
The United States Treasury’s Office of Foreign Assets Control had added Tornado Cash to its SDN list in August 2022, alleging it had enabled billions in illicit funds.
The court upheld the Treasury Department’s decision to impose sanctions on Tornado Cash, stating that it is entitled to do so under current sanction statutes.
The plaintiffs argued that the government’s action violated the first amendment, but the judge disagreed, stating that it did not implicate the first amendment.
The judge also determined that Tornado Cash operates as an association and that its smart contracts are subject to sanctions under the regulatory definitions outlined by the OFAC.

Coinbase Continues to Support Lawsuit Against OFAC Action

Coinbase’s chief legal officer, Paul Grewal, stated that the exchange continues to believe in the plaintiffs’ challenge against the OFAC action and supports them on appeal.
However, the judge noted that the plaintiffs did not pursue their claim that their inability to access Ethereum trapped in Tornado Cash violated the fifth amendment.
The judge granted summary judgment in favor of the government and the Treasury Department, reinforcing their authority to sanction Tornado Cash.
The court filing stated that Tornado Cash is an association and can be designated per OFAC regulations.
Tornado Cash has been classified by the OFAC as an entity that operates a cryptocurrency mixing service used for money laundering.

Hot Take: Judge Upholds Sanctions on Tornado Cash, Rejecting First Amendment Argument

The US District Judge’s decision to dismiss the appeal and uphold the sanctions on Tornado Cash reinforces the authority of the Treasury Department’s Office of Foreign Assets Control. The judge determined that Tornado Cash operates as an association and that its smart contracts fall under OFAC regulations. While the plaintiffs argued that the government’s action violated their first amendment rights, the judge disagreed, stating that there was no infringement. This ruling highlights the challenges faced by cryptocurrency mixers in navigating regulatory frameworks and the potential consequences they may face for facilitating illicit activities.