Judges Panel Reverses Treasury Ruling: Tornado Cash Back in Legal Spotlight

In 2022, under the U.S. Treasury Department, the Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash, citing its use in laundering billions of dollars, including funds tied to North Korean hackers.

The plaintiffs, including Joseph Van Loon and other “Ethereum blockchain users,” challenged these measures, arguing that they exceeded OFAC’s legal authority and violated constitutional rights such as free speech and due process.

The Fifth Circuit’s decision, delivered on Nov. 26, 2024, found that the district court had erred in its earlier ruling. The appellate judges ordered the case to return to the lower court for further proceedings, emphasizing the need to reuate the sanctions’ legality under a stricter constitutional framework.

“Mending a statute’s blind spots or smoothing its disruptive effects falls outside our lane,” the ruling published on Tuesday states. “We decline the Department’s invitation to judicial lawmaking … revising Congress’s handiwork under the guise of interpreting it. Legislating is Congress’s job … and Congress’s alone.”

Tornado Cash, an Ethereum-based platform, enables users to obscure blockchain transactions by mixing them with others, thereby enhancing privacy. Critics, however, like the U.S. government, assert that this functionality facilitates illegal activities, including money laundering.

The appellate court’s decision highlights the tension between privacy advocates, who argue that tools like Tornado Cash serve legitimate purposes, and regulators, who aim to curb their misuse. Following the decision, the crypto asset tied to the Tornado Cash project called TORN jumped over 500%. As of 6 a.m. Eastern Time on Wednesday, TORN is still up 375%.