Sanctioning Code: Tornado Cash's Delisting and Roman Storm's Split Verdict

The day the Treasury sanctioned software

On August 8, 2022, the U.S. Treasury's Office of Foreign Assets Control added Tornado Cash, an Ethereum-based mixing service, to its sanctions list under Executive Order 13694, as amended, after its May 6, 2022 designation of another mixer, Blender.io. The target included open-source smart contracts on a public blockchain.^[1][2]

The Treasury's stated case was about scale. Its press release asserted that Tornado Cash had laundered over $7 billion since 2019 — including over $455 million stolen by the DPRK-linked Lazarus Group, more than $96 million from the June 2022 Harmony Bridge heist, and at least $7.8 million from the Nomad heist. All were government claims, not court findings.^[1]

Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks.^[1]

— Brian E. Nelson, then-Under Secretary of the Treasury for Terrorism and Financial Intelligence

What made Tornado Cash hard to sanction was its mechanics. A user generated a secret 'deposit note' and sent a cryptographic hash of it into a shared pool of 0.1, 1, 10, or 100 ETH. To withdraw, the user proved via zero-knowledge cryptography that they held a valid note, without revealing which deposit was theirs; an optional relayer submitted the withdrawal for a 0.05% to 0.2% fee, severing the deposit-withdrawal link. Chainalysis called the protocol decentralized and non-custodial: it never took custody of funds, and most of its contracts could not be changed or destroyed by anyone.^[2]

Immutable code meets a 1977 emergency statute

Six Tornado Cash users, led by Joseph Van Loon, sued, arguing that listing the protocol exceeded OFAC's authority. The district court granted the government summary judgment; they appealed. On November 26, 2024, a Fifth Circuit panel — Judges Jones, Willett, and Engelhardt — delivered the counter-ruling the industry had awaited.^[3]

Writing for the panel, Judge Don R. Willett framed the dispute around two prized attributes of Tornado Cash: privacy, by anonymizing transactions, and immutability — the code was 'unownable, uncontrollable, and unchangeable — even by its creators.' The question was whether such code could be anyone's 'property' under the International Emergency Economic Powers Act of 1977.^[3]

Perhaps Congress will update IEEPA, enacted during the Carter Administration, to target modern technologies like crypto-mixing software. Until then, we hold that Tornado Cash's immutable smart contracts (the lines of privacy-enabling software code) are not the “property” of a foreign national or entity, meaning (1) they cannot be blocked under IEEPA, and (2) OFAC overstepped its congressionally defined authority.^[3]

— Judge Don R. Willett, U.S. Court of Appeals for the Fifth Circuit

The court reversed and remanded with instructions to grant partial summary judgment. The ruling was a civil decision about sanctions authority — separate from the criminal prosecution of developer Roman Storm, which proceeded on its own track in a New York federal court.^[3][6]

Delisting day in March 2025

On March 21, 2025, Treasury announced it had exercised its discretion to remove the sanctions, as reflected in its filing in the Van Loon case. The decision followed an Administration review of the novel issues raised by sanctions against activity in evolving technology and legal environments, alongside continued warnings about DPRK-linked hacking and laundering.^[4]

OFAC's action the same day deleted the Tornado Cash entity entries — the tornado.cash website and a long list of Ethereum addresses — from the Specially Designated Nationals List. Roman Semenov's individual entry was updated rather than removed. That action establishes only the different list treatment of the protocol entries and Semenov's individual entry.^[5]

Digital assets present enormous opportunities for innovation and value creation for the American people. Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership and ensuring that the American people can benefit from financial innovation and inclusion.^[4]

— Scott Bessent, U.S. Secretary of the Treasury

Chainalysis updated its sanctions guide with a note that the Tornado Cash-specific sanctions risks described there no longer applied after March 21, 2025. The update changed the protocol's sanctions status; it did not say that firms had to abandon broader screening or anti-money-laundering controls.^[2][4]

One conviction, two deadlocks

The criminal case reached its first destination on August 6, 2025, when a Southern District of New York jury returned its verdict against Roman Storm. Per the parties' August 11 joint status letter, the jury convicted Storm on Count Two — conspiracy to operate an unlicensed money-transmitting business — and could not reach a verdict on Count One, money-laundering conspiracy, or Count Three, sanctions-violations conspiracy.^[6][7]

Count Two, the sole adjudicated conviction, concerned operating a money-transmitting business — the Tornado Cash service — knowing it transmitted crime proceeds, in the government's framing under 18 U.S.C. § 1960. Its filing described a four-week trial with more than 400 exhibits and 21 witnesses — details from a party's filing, not a neutral summary.^[7]

The joint letter set the post-verdict machinery in motion. Storm intended to file post-trial motions that could affect the scope of any retrial on Counts One and Three, and might also seek a retrial on Count Two. The parties agreed motions were due September 30, oppositions October 31, replies November 19, and asked the court to exclude time under the Speedy Trial Act's 70-day retrial clock.^[6]

In November 2025 the government opposed Storm's motion for judgment of acquittal, calling the evidence 'more than sufficient; it was overwhelming' and rejecting his claim that Tornado Cash was nothing more than a decentralized protocol of immutable pools. Those are party arguments, not adjudicated facts: the Rule 29 ruling remained pending.^[7]

What remains unresolved

Through the summer of 2026, the deadlocked counts stayed unresolved. On June 15, 2026, the government proposed a schedule pending the Rule 29 ruling: government expert disclosures by August 7; defense disclosures by September 4; rebuttal disclosures by September 17; Daubert motions, in limine motions, and proposed amendments to jury instructions and voir dire by September 29; oppositions by October 9; and a final pretrial conference on October 20, 2026.^[8]

No accessible filing establishes a fixed retrial date. As of August 23, 2026, Counts One and Three remain without a verdict, the Rule 29 ruling is pending, and the schedule is a proposal awaiting the court's rulings. Precision matters: this is retrial preparation pending, not a retrial set for a date.^[8][6]

The lasting picture is a fork in the road. In the civil lane, the Fifth Circuit held that Tornado Cash's immutable contracts were not property of a foreign national or entity that OFAC could block under IEEPA, and Treasury later delisted the protocol. In the criminal lane, Storm stands convicted only on the business count, while Counts One and Three remain unresolved. The court's invitation to Congress shows that the statutory boundary remains open to legislative debate.^[3][4][8]