US Treasury Backs Down: Court Smashes Tornado Cash Sanctions as Unenforceable

The US Treasury just got schooled by the courts—again. In a stunning reversal, officials dropped their appeal against Tornado Cash after a federal judge ruled their sanctions were about as enforceable as a pinky promise.

Privacy wins (for now)

The ruling torpedoes Washington's ham-fisted attempt to blacklist code instead of criminals. Tornado's mixing protocol—which obfuscates crypto trails like a VPN for your wallet—remains legal despite Treasury's tantrum.

Regulators left scrambling

This marks the second major DeFi court loss for Uncle Sam this year. Apparently 'financial surveillance' doesn't play well when judges actually read the Constitution. Meanwhile, Wall Street still launders billions through traditional banks—but sure, let's panic about open-source software.

The irony? Treasury's overreach just gave Tornado Cash more publicity than its devs ever could've bought. Nothing boosts adoption like government hysterics.

Storm still stands trial despite Tornado Cash sanctions resolution

While the civil battle over sanctions has ended, Storm’s criminal trial is moving forward, and the charges are far heavier than anything brought by the US Securities and Exchange Commission. Storm is set to go on trial from July 14.

The Department of Justice claims Storm and fellow developer Roman Semenov were responsible for laundering over $1 billion, some of which allegedly came from the Lazarus Group, a North Korean hacking outfit tied to massive crypto heists.

Despite the serious allegations, US courts have shown more openness to the defense put forward by Storm and his legal allies.

Storm, backed by Coinbase and the ethereum Foundation, argues that the government is targeting software code, not actions. The entire defense hinges on that point. And while it may have seemed unlikely at first, it’s starting to get traction. A separate civil case has also been built around this same argument, adding more legal pressure on the government’s stance.

In May 2024, Alexey Pertsev, another Tornado Cash developer, was convicted by a Dutch court for money laundering and sentenced to five years in prison. He had argued that smart contracts on Tornado Cash run automatically, and he had no direct control.

The judges rejected that reasoning and held him accountable anyway.

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