U.S. Court Rules OFAC's Sanctions on Tornado Cash Smart Contracts Are Illegal

Foresight News reports that the U.S. Fifth Circuit Court of Appeals ruled that the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) exceeded its statutory authority under the International Emergency Economic Powers Act (IEEPA) when it added Tornado Cash to the Specially Designated Nationals and Blocked Persons (SDN) list, as Tornado Cash's immutable smart contracts do not constitute 'property' that can be frozen, and its open-source, self-executing software is not subject to sanctions.

Previously, OFAC added Tornado Cash to the SDN list in 2022, citing that the software was used for money laundering activities, including laundering funds for the North Korean hacking group Lazarus Group. Tornado Cash filed a lawsuit claiming that OFAC did not have the authority to include Tornado Cash on the SDN list.