Judge May Exclude 2022 Sanctions From Tornado Cash Trial

Judge Katherine Failla of the US District Court of the Southern District of New York has indicated that she is likely to disallow any mention of the 2022 sanctions against the cryptocurrency mixing service Tornado Cash in the upcoming trial of its co-founder and developer, Roman Storm. The sanctions, imposed by the US Treasury’s Office of Foreign Assets Control (OFAC), added addresses connected to Tornado Cash to its list of Specially Designated Nationals. However, these sanctions were later withdrawn following a federal judge's order in a civil case filed by Tornado Cash users.

Failla's decision to potentially exclude the sanctions from the trial suggests a recognition of the complex legal and technical issues surrounding cryptocurrency mixers. These services are designed to obscure the trail of digital transactions, making them a contentious tool in the debate over privacy and illicit activities. Prosecutors have argued that Tornado Cash's anonymity features make it a prime tool for criminal activities, while defense attorneys contend that the platform is a legitimate tool for privacy-conscious users.

The judge's ruling could significantly impact the prosecution's case against Storm, who is accused of money laundering, conspiracy to operate an unlicensed money transmitter, and conspiracy to violate US sanctions. The decision comes as part of a broader legal battle surrounding the use of cryptocurrency mixers and sets a precedent for how courts may handle cases involving cryptocurrency and privacy tools in the future. The outcome of the Storm trial will be closely watched by legal experts, cryptocurrency enthusiasts, and regulators alike, as it could shape the future of digital currency law and policy.

The implications of this ruling extend beyond the Storm trial. It highlights the evolving nature of cryptocurrency regulation and the need for clear and consistent guidelines on the use and regulation of cryptocurrencies, as well as the tools and services that support them. The Storm trial will serve as a critical test case for how the legal system navigates these complex issues, and its outcome could have far-reaching implications for the future of digital finance.

Many high-profile figures in the crypto and blockchain industry have called for the charges against Storm to be dropped, echoing similar claims that “writing code is not a crime.” The Ethereum Foundation, Ethereum co-founder Vitalik Buterin, and Paradigm founder Matt Huang have contributed thousands of dollars to the Tornado Cash co-founder’s legal fund ahead of his trial. Assuming it moves ahead as scheduled, Storm’s criminal trial is likely to be one of the most significant legal events affecting the crypto industry following the conviction of former FTX CEO Sam Bankman-Fried and the sentencing of former Binance CEO Changpeng Zhao and former Celsius CEO Alex Mashinsky. Terraform Labs co-founder Do Kwon also faces federal charges related to securities fraud, commodities fraud, market manipulation, and money laundering after his extradition from Montenegro to the US.