U.S. Appeals Court Dismisses Tornado Cash Sanctions Lawsuit, But Legal Uncertainty Lingers

The U.S. Court of Appeals for the Eleventh Circuit has officially dismissed Coin Center’s lawsuit against the U.S. Treasury Department, ending one of the most closely watched legal battles in crypto regulation. The suit challenged the Treasury’s sanctions on Tornado Cash, a decentralized crypto-mixing protocol accused of facilitating illicit transactions, including laundering stolen cryptocurrency.

The dismissal follows the Treasury’s Office of Foreign Assets Control (OFAC) decision earlier this year to remove Tornado Cash from its sanctions list.

The agency argued that this move made the case irrelevant. Both sides agreed to close the case, though Coin Center noted that a related lawsuit in Texas remains active.

The Battle Over Sanctioning Code

The original sanctions, announced in August 2022, targeted Tornado Cash for allegedly enabling the laundering of over $1 billion in stolen crypto, including funds linked to North Korea’s Lazarus Group . 

However, blockchain analytics firm Chainalysis has reported that Tornado Cash processed a total of about $7.8 billion in illicit funds since its inception in 2019, including proceeds from hacks, ransomware attacks, and other cybercrimes. The firm also noted that just four deposit addresses received over $1 billion in illicit cryptocurrency in 2022 alone.

These restrictions banned U.S. individuals and businesses from using the protocol, igniting significant backlash from developers, privacy advocates, and the broader crypto community.

What made these sanctions historic was their unprecedented target: not a person or company, but open-source software code itself.

Coin Center argued that OFAC lacked the statutory authority to sanction immutable code and accused the agency of violating constitutional protections like free speech and due process.

Though the court’s dismissal didn’t resolve those fundamental legal questions, OFAC’s quiet retreat suggests it was reluctant to test its interpretation of the law in court.

Criminal Charges Against Co-founder Still Loom

Despite the lawsuit’s dismissal, the Tornado Cash saga is far from over. Co-founder Roman Storm is facing a criminal trial later this month on charges including conspiracy to commit money laundering and operating an unlicensed money transmission service.

Reportedly, Storm hasn’t yet decided whether to testify in his own defense. His legal team plans to argue that Tornado Cash was a tool, not a business, and that Storm did not personally profit from criminal activity.

Why This Matters

This case is a flashpoint in the broader debate over how regulators should approach decentralized technologies that operate without central control.

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