Judge Excludes OFAC Sanctions in Tornado Cash Trial, TORN Value Rises 5%

A U.S. federal judge has made a significant ruling in the upcoming trial of Roman Storm, the co-founder of Tornado Cash. The judge has decided that the sanctions imposed by the Office of Foreign Assets Control (OFAC) against Tornado Cash will not be admissible as evidence in Storm's criminal trial. This decision is set to impact the proceedings scheduled for July 14, 2025, in the Southern District of New York.

The ruling comes after a legal challenge involving prominent figures such as Roman Storm and Peter Van Valkenburgh, representing Coin Center, an advocacy group contesting the sanctions' legality. The judge's decision follows the vacating of the sanctions and has led to a 5% increase in the value of TORN, the protocol's governance token, reflecting investor confidence in the privacy-oriented cryptocurrency.

The exclusion of OFAC sanctions from the trial underscores the legal complexities in crypto regulation and affects market perceptions. The market response demonstrates increased optimism in privacy-oriented cryptocurrencies, with Ethereum (ETH) witnessing interest due to Tornado Cash operating on its blockchain. Experts suggest this ruling could influence privacy token regulations, sparking broader discussions among developers and privacy advocates.

During a pretrial hearing, Judge Katherine Polk Failla granted Storm's defense request to exclude testimony and references related to the OFAC sanctions. The judge cited concerns that discussing the sanctions could lead to confusion among the jury, potentially causing them to engage in what she described as "mental gymnastics." However, she left open the possibility for the prosecution to revisit the exclusion if they can present compelling evidence that directly links Storm’s actions to the sanctions.

The judge also ruled that the case cannot involve discussions around the legality of the OFAC sanctions, particularly referencing the "Van Loon v. Department of Treasury" ruling. The defense had sought to highlight this point, but such legal arguments are now excluded from the proceedings. This decision is seen as a strategic move to streamline the trial and focus on the core allegations against Storm.

Other pretrial motions filed by the defense, including a request to prohibit mentioning Storm's alleged ties to North Korea’s hacking group Lazarus, were denied. Prosecutors have alleged that Storm reaped "substantial financial benefits" after the sanctions, including the sale of Tornado Cash (TORN) tokens valued at $12 million and the purchase of residential property. Storm is not being directly charged under the Bank Secrecy Act (BSA) for failure to implement anti-money laundering (AML) or know-your-customer (KYC) measures. However, prosecutors aim to spotlight his omission of such safeguards through expert testimonies. They argue that Storm could have, but did not, implement these measures despite knowing their necessity.

A second FBI report, derived from the forensic analysis of co-developer Alexey Pertsev’s mobile phone—provided by Dutch authorities—has also been admitted as evidence. While Storm's defense challenged the credibility of the report, the court ruled in favor of the prosecution. This evidence is expected to play a crucial role in the trial, as it directly ties Storm to the operations of Tornado Cash.

Judge Failla also ruled out the possibility of Storm invoking the First Amendment or freedom of speech as a defense strategy. While the developer may reference his personal beliefs regarding privacy rights, defending actions under the First Amendment will not be permitted in this trial. “This trial is not the forum for a First Amendment-based defense,” Judge Failla noted, underscoring that the trial pertains to criminal charges, not constitutional debates.

The trial, which began on September 14, is expected to last approximately four weeks. Legal analysts are closely monitoring the case, as its outcome could set a significant precedent for developers of decentralized privacy tools and the broader cryptocurrency industry. Prosecutors will continue to focus on allegations surrounding Storm’s financial dealings and his role in Tornado Cash, a mixing service flagged for its use in laundering illicit funds. The exclusion of the OFAC sanctions from the trial is seen as a strategic move by the judge to ensure a fair and focused proceeding, free from potential distractions and confusion.