Treasury Department Drops Case Over Ethereum Mixer Tornado Cash

The U.S. Treasury Department and Washington, D.C.-based advocacy group Coin Center have agreed to end an appeal centered on the Ethereum coin mixer Tornado Cash. On Thursday, the United States Court of Appeals for the Eleventh Circuit granted a joint motion to vacate the judgement and remand with instructions to dismiss, court filings show. Bloomberg Law first reported the news Monday. Both parties agreed that the appeal is “moot,” given the Office of Foreign Asset Control’s decision to remove economic sanctions against Tornado Cash in March. The office, a component of the U.S. Treasury department, blacklisted Tornado Cash in 2022.

The government didn’t want to argue that it has the statutory authority to sanction Tornado Cash in court, according to Coin Center Executive Director Peter Van Valkenburgh. “This is the official end to our court battle,” Valkenburgh wrote on X, formerly Twitter. “The government was not interested in moving forward and defending their dangerously overbroad interpretation of interpretation of sanctions laws.”

A fifth circuit judge ruled in November that the government had overstepped its authority in sanctioning Tornado Cash’s smart contracts, which hold the code that powers the autonomous, decentralized app. The coin mixer’s smart contracts couldn’t be classified as property because they are immutable, meaning no entity can modify them.

The government said it was targeting Tornado Cash in 2022 because the service had been used by Lazarus Group, a North Korean state-sponsored hacking group, to launder billions of dollars. Tornado Cash developers were hit with money laundering charges a year later. Over time, the government’s efforts to ban Tornado Cash became a lightning rod for privacy advocates warning of government overreach. Crypto-industry participants also argued that developers were being targeted simply for exercising their right to free speech—but a Manhattan judge found that argument lacking in court.

Despite OFAC’s about-face, Tornado Cash co-founder Roman Storm still faces prosecution. His trial is expected to begin in a week in New York, while Tornado Cash developer Alexey Pertsev was let out on supervised release in February in the Netherlands. Pertsev, who was convicted in a Dutch court on money laundering charges last year, was given a 64-month prison sentence. If Storm is found guilty on all charges, then the 35-year-old software developer faces up to 45 years behind bars.

Terron Gold