Judge Bars OFAC Sanctions Discussion in Tornado Cash Developer Trial

In a significant development, District Judge Katherine Polk Failla has ruled that the U.S. Treasury Department’s Office of Foreign Asset Control’s (OFAC) sanctions against the privacy tool Tornado Cash cannot be discussed during the upcoming trial of developer Roman Storm. This decision came during a status conference held in Manhattan on Tuesday.

Initially, Failla considered allowing expert witnesses to testify about the sanctions, which were imposed in August 2022, removed in March, and subsequently deemed illegal by a Texas court. However, after hearing arguments from both the prosecution and the defense, Failla granted Storm’s motion in limine to prohibit any testimony about the sanctions. She argued that discussing the sanctions would be too confusing for the jury, requiring what she described as “mental gymnastics” to understand why the sanctions were imposed and ultimately removed.

Failla stated, “I am going to preclude references to the August 2022 OFAC sanctions,” with the exception of a potential “unicorn document”—a key piece of evidence for the prosecution that hinges on Storm’s alleged conduct after the sanctions were imposed. This document could change her mind before the trial begins. Prosecutors were given until Wednesday to submit any such evidence. Earlier in the day, Failla had ruled that the parties would not be allowed to discuss the Van Loon v. Treasury Department case, which led to the sanctions being dropped.

The rest of Storm’s motions in limine were denied, including a motion to preclude references to North Korea’s state-sanctioned hacking group, the Lazarus Group, and a motion to preclude “inflammatory characterizations” of Storm’s TORN sales. Prosecutors plan to introduce evidence demonstrating that Storm profited from his involvement in Tornado Cash, including allegedly purchasing multiple homes and selling $12 million worth of TORN tokens after OFAC sanctioned Tornado Cash.

Prosecutors clarified that they do not plan to argue at trial that Storm violated the Bank Secrecy Act (BSA) by not implementing a know-your-customer/anti-money laundering protocol for Tornado Cash. Instead, they will express through their expert witness testimony that he could have and chose not to. Failla also ruled to allow the government to produce evidence from Storm’s fellow Tornado Cash developer Alexey Pertsev’s phone. The Dutch government allowed a U.S. Federal Bureau of Investigation (FBI) agent to view a report of the contents of Pertsev’s phone, from which the agent made his own report with selected pieces of information. Storm’s defense attempted to get the Pertsev phone evidence tossed out, arguing that the report was cherry-picked and impossible to authenticate, but the judge sided with the prosecution, ruling that the report was admissible.

After much back and forth between the parties over their respective expert witnesses, Failla ruled that all of the witnesses could testify, though she put some guardrails on certain witnesses for both sides. It is not yet clear whether Storm will testify in his own defense, though Failla said Tuesday that, should he take the stand, he will not be permitted to argue that he had First Amendment protections in his work with Tornado Cash. Failla said that Storm was free to discuss his belief in privacy rights, but stated, “I don’t think free speech or First Amendment rights should come up at this trial.”

A final pre-trial conference will be held telephonically at 3 pm ET on Friday. Storm’s trial is slated to begin June 14 and is expected to run for four weeks.