Tornado Cash Faces Lifted Penalties in Court Decision
The U.S. Fifth Circuit Court of Appeals has ruled that the Treasury’s Office of Foreign Assets Control (OFAC) overstepped its authority by sanctioning the immutable smart contracts underlying Tornado Cash, a cryptocurrency mixer. This decision, which became final and unappealable in June 2025, effectively ended a three-year legal battle over the OFAC designation, compelling the agency to remove Tornado Cash from its sanctions list in March 2025.
The ruling, which has significant implications for the scope of sanctions authority, limits OFAC’s reach to sanctioning entities or individuals over whom they can exercise meaningful control—not immutable, decentralized code. This could insulate other privacy-focused crypto tools from blanket sanctions, provided their code is similarly immutable and lacks centralized governance.
Crucially, the ruling does not absolve individuals (such as developers or operators) from criminal liability. The U.S. Department of Justice continues to pursue money laundering charges against Tornado Cash developers Roman Storm and Roman Semenov, whose trials are pending.
The decision may have broader implications for cases involving digital assets and financial sanctions. The U.S. District Court for the Western District of Texas will handle the case of Tornado Cash again, taking into account the appellate court's decision.
The ruling is also significant as it challenges the authority of the Office of Foreign Assets Control (OFAC) in imposing sanctions. As a result, the case of Tornado Cash, a cryptocurrency mixer, has been the subject of legal proceedings and sanctions by the Office of Foreign Assets Control (OFAC) in the United States.
Meanwhile, figures within the crypto community hope the court ruling could positively impact the legal case of Alexey Pertsev, a core developer of Tornado Cash who was arrested in the Netherlands in August 2022 and later convicted (May 2023) of money laundering by a Dutch court. His case, which is under Dutch jurisdiction, operates independently of U.S. federal rulings. However, the Fifth Circuit’s reasoning could have some influence on legal arguments in other jurisdictions, particularly regarding the nature of smart contracts and the liability of developers for code they did not control after deployment.
In summary, the Fifth Circuit’s decision marks a significant setback for U.S. efforts to sanction decentralized crypto privacy tools via smart contracts, establishing that immutable code is not “property” subject to OFAC sanctions. However, this does not protect individual developers from criminal prosecution, as seen in both U.S. and Dutch cases. While the ruling may shape international legal discourse on developer liability for decentralized services, it has no direct legal effect on Alexey Pertsev’s conviction in the Netherlands, though it could offer persuasive arguments in broader policy debates or future appeals.
The ruling has significant implications for the finance sector, as it limits the Office of Foreign Assets Control's (OFAC) reach to sanctioning entities or individuals over whom they can exercise meaningful control, rather than immutable, decentralized code, such as the smart contracts underlying Tornado Cash. However, the U.S. Department of Justice continues to pursue money laundering charges against Tornado Cash developers, despite the OFAC's sanctions being lifted.
