The U.S. Treasury Department has officially removed cryptocurrency mixer Tornado Cash from its blacklist, as announced on March 21.
This decision follows a January ruling by a U.S. appeals court, which determined that the Treasury’s Office of Foreign Assets Control (OFAC) lacked the authority to sanction Tornado Cash’s smart contracts. The court reasoned that these contracts do not belong to any specific foreign national or entity and, therefore, cannot be considered sanctionable assets.
In its ruling, the court stated: “Tornado Cash’s immutable smart contracts (lines of privacy-enabling software code) do not constitute ‘property’ owned by a foreign individual or organization, meaning […] OFAC exceeded its legally established authority.”
As a result, OFAC has now delisted multiple Ethereum blockchain addresses associated with Tornado Cash.
Following the news, Tornado Cash’s native token, TORN, surged approximately 60%, according to CoinMarketCap data. As of March 21, TORN’s market capitalization is around $73 million, with a fully diluted valuation (FDV) nearing $140 million.
OFAC is the Treasury department responsible for enforcing economic and trade sanctions against foreign entities and individuals.
Tornado Cash allows users to deposit cryptocurrency into a mixing protocol, later enabling withdrawals to different wallet addresses. This process obscures the origin of the funds, making transactions more difficult to trace.
Allegations of Money Laundering
In August 2022, OFAC initially sanctioned Tornado Cash, alleging that the protocol facilitated cryptocurrency laundering for the Lazarus Group, a North Korean-linked hacking organization.
The Lazarus Group has been accused of stealing billions in digital assets through various cyberattacks. Notably, in February 2024, the group was allegedly responsible for a $1.4 billion exploit of the crypto exchange Bybit—the largest hack in the industry’s history.
Since its launch in 2019, Tornado Cash has reportedly been used to launder over $7 billion in illicit funds, according to the U.S. Treasury.
Legal troubles for Tornado Cash continued into 2024 when a Dutch court convicted one of its developers, Alexey Pertsev, of money laundering. He was sentenced to 64 months in prison. However, Pertsev was later released on house arrest in February as he prepares to appeal the ruling.
In a show of support, the Ethereum Foundation has committed $1.25 million to Pertsev’s legal defense. “Privacy is normal, and writing code is not a crime,” the organization stated in a post on X (formerly Twitter) on February 26 while announcing the donation.
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