OFAC Barred From Reinstating Sanctions
A US Federal court has ruled that the Department of the Treasury is barred from reinstating its sanctions against crypto mixer Tornado Cash. The decision follows the Treasury Department’s attempt to claim the case was moot after delisting the protocol from the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN).
US Treasury Barred From Reimposing Tornado Cash Sanctions
On Monday, Judge Robert Pitman of the US District Court for the Western District of Texas granted a major win to crypto privacy after ruling that the US Treasury’s actions against Tornado Cash were “unlawful” and barred from reimposing the same sanctions on the crypto mixer in the future.
In August 2022, OFAC sanctioned Tornado Cash for allegedly failing to impose effective controls preventing malicious actors from laundering over $7 billion worth of crypto since 2019 through the protocol, including $455 million by North Korea’s hacking group, Lazarus Group.
US District Court for the Western District of Texas’s amended final ruling. Source: Paul Grewal on X
In January 2025, the US District Court for the Western District of Texas reversed the OFAC sanctions against Tornado Cash following a November 2024 court ruling that determined the US Treasury had exceeded its authority by sanctioning the platform.
A month ago, OFAC delisted Tornado Cash and nearly 100 Ethereum addresses affiliated with the Ethereum-based crypto mixer from its SDN list. However, the US Treasury faced backlash for claiming that a final court ruling on the lawsuit was moot after delisting the protocol from the sanctions list.
Coinbase’s CLO Paul Grewal criticized the Treasury Department’s actions, arguing that it had not assured that it wouldn’t relist he crypto mixer in the future. Moreover, the agency stated that it would continue to monitor any transactions that could benefit malicious actors or the Democratic People’s Republic of Korea (DPRK).
In the amended final judgment, the court ruled that “this case is not moot because the issue is capable of repetition while evading review,” noting that the US Treasury sought to moot the case by changing relevant facts “via additional agency action” instead of “simply filing a responsive brief about the entry of a final judgment effectuating the Fifth Circuit’s mandate.”
Defendants do not suggest they will not sanction Tornado Cash, and they may seek to “reenact[] precisely the same [designation]” in the future (…). Rather than acknowledge that the Fifth Circuit’s order required delisting Tornado Cash, Defendants state that they exercised their “discretion” in deciding to do so based on more general policy and legal considerations. They state publicly that they will continue to review the economic sanctions at issue closely in the future.
As a result, Judge Pitman granted the Plaintiffs’ request for a summary judgment and the order “that the Defendants’ designation is unlawful and therefore set aside, and that Defendants are permanently enjoined from enforcing it.”
Crypto Privacy Fight Continues
The Court also acknowledged that the Tornado Cash case involves “sensitive issues of security and economic regulation,” and that the US Treasury insists the Fifth Circuit’s ruling be treated as a “narrow” holding to not restrict the agency from regulating similar assets and technology in the future.
Nonetheless, the Judge stated that “how narrowly or broadly future courts will interpret the Fifth Circuit’s ruling when reviewing other agency determinations is not the issue before this Court,” and limited “simply to enter partial summary judgment in favor of Plaintiffs as instructed by the Fifth Circuit.”
Notably, the fight for crypto privacy tools and open-source developers continues, as Tornado Cash’s co-founder, Roman Storm, and developer, Alexey Pertsev, prepare for their legal defense. Pertsev, convicted nearly a year ago, prepares to appeal his 5-year sentence in the Netherlands, while Storm, who faces up to 45 years in prison if found guilty, awaits his trial in July.
The DeFi Education Fund recently sent a letter to US President Donald Trump’s Crypto Czar, David Sacks, urging the White House to end the Department of Justice’s war on open-source developers.
The letter, signed by multiple industry leaders, noted that trying to hold software developers criminally liable for how third parties use their code will set a terrible precedent and “freeze” technological innovation in the US, which would oppose Trump’s promise to make America “the crypto capital of the planet.”
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