A U.S. District Court for the Western District of Texas has reversed sanctions previously imposed on the cryptocurrency mixer Tornado Cash by the Treasury’s Office of Foreign Assets Control (OFAC).

The decision marks a significant development in the legal treatment of privacy-focused technologies within the cryptocurrency ecosystem.

In August 2022, OFAC sanctioned Tornado Cash, alleging it facilitated money laundering activities, including laundering $455 million in stolen cryptocurrency by North Korea’s Lazarus Group. This led to the arrest of Tornado Cash developer Alexey Pertsev, who was later sentenced to over five years in prison by a Dutch court for his role in laundering illicit funds.

Reversal of Sanctions

On January 21, 2025, the court ruled that Tornado Cash’s immutable smart contracts could not be classified as “property” under the International Emergency Economic Powers Act (IEEPA). This act grants the President authority to block property linked to foreign interests.

The court highlighted that Tornado Cash’s immutable smart contracts, which operate without human intervention, do not fit the legal definition of “property” or “contracts” that involve mutual agreements between parties. The ruling stated:

“Immutable smart contracts have only one party in play … Tornado Cash, free of any human effort in execution, also does not qualify as a service.”

While OFAC expanded the definition of property to include “contracts of any nature,” the court determined this did not apply to Tornado Cash’s self-executing code.

Impact on Cryptocurrency Privacy

The decision was influenced by arguments from six Tornado Cash users, who filed a lawsuit claiming that OFAC exceeded its authority by sanctioning software rather than a person or entity. The plaintiffs also noted the importance of privacy in blockchain transactions, emphasizing that many users value options for confidential financial activity.

Following the court’s decision, Tornado Cash’s native cryptocurrency, TORN, surged by 140%, rising from $9.50 to over $23.