Tornado Cash Sanctions Vacated, TORN Token Jumps 5%

A US court in Florida has vacated the sanctions imposed on Tornado Cash, a privacy mixer on Ethereum. The sanctions, initiated by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) in 2022, had a significant impact on the platform's users and developers, Roman Storm and Roman Semenov. The decision to vacate the sanctions was made following a joint filing by Coin Center, a crypto advocacy group, and the US Treasury. The Eleventh Circuit Court of Appeals granted a motion to vacate the lower court's ruling, instructing the lower court to dismiss the case entirely. This move effectively ends the enforcement of the sanctions guidance and concludes a legal battle over economic sanctions imposed on the cryptocurrency mixer.

The vacating of sanctions led to a 5% increase in Tornado Cash's governance token, TORN. This increase reflects the market's positive sentiment towards privacy-centric protocols following the lifting of legal barriers. The broader implications of this decision include potential increases in user confidence for privacy-focused DeFi tools. The financial markets showed initial positivity, with an increase in TORN token activity, indicating a shift in market sentiment about privacy-centric protocols.

Key figures from Coin Center expressed relief over the ruling, criticizing OFAC's expansive sanctions interpretation. The decision is expected to impact privacy-focused cryptocurrencies broadly and may trigger renewed interest in decentralized finance ecosystems. Historical precedent suggests potential rebounds in sectors previously affected by regulatory pressures, similar to outcomes from the 2024 Van Loon case. While Tornado Cash developers have yet to release further comments, Peter Van Valkenburgh's statements anchor the government's concession in legal interpretations. "This is the official end to our court battle over the statutory authority behind the TC sanctions. The government was not interested in moving forward and defending their dangerously overbroad interpretation of sanctions laws," said Peter Van Valkenburgh, Executive Director, Coin Center.

Roman Storm's impending trial continues to be a focal point for ongoing crypto privacy and regulatory discourse. The vacated sanctions ruling on Tornado Cash may signal a shift in regulatory stances toward decentralized finance, with broader implications for the privacy sector. Despite the resolution of the civil battle over sanctions, co-founder Roman Storm still faces criminal charges. Storm is set to go on trial from July 14. The Department of Justice claims Storm and fellow developer Roman Semenov were responsible for laundering over $1 billion, some of which allegedly came from the Lazarus Group, a North Korean hacking outfit tied to massive crypto heists. Despite the serious allegations, US courts have shown more openness to the defense put forward by Storm and his legal allies. Storm, backed by Coinbase and the Ethereum Foundation, argues that the government is targeting software code, not actions. The entire defense hinges on that point. And while it may have seemed unlikely at first, it’s starting to get traction. A separate civil case has also been built around this same argument, adding more legal pressure on the government’s stance.

In May 2024, Alexey Pertsev, another Tornado Cash developer, was convicted by a court for money laundering and sentenced to five years in prison. He had argued that smart contracts on Tornado Cash run automatically, and he had no direct control. The judges rejected that reasoning and held him accountable anyway. This case highlights the complex legal landscape surrounding cryptocurrency mixers and the challenges faced by developers in defending their actions. The ruling means that the government’s guidance on enforcing those sanctions is now nullified. The court had heard oral arguments on November 19 but never ruled. Instead, both sides filed a joint motion to dismiss the judgment, which was granted. This decision was filed with the Eleventh Circuit Court of Appeals, which then tossed the judgment and told the lower court to dismiss the case entirely. The tool in question, Tornado Cash, is a Russian-developed crypto mixer. With this latest move, its place on the sanctions list is no longer active.