A US court ruled in favour of Tornado Cash on January 21. This ruling lifts the sanction that the Treasury’s Office of Foreign Assets Control (OFAC) placed on Tornado Cash.
In August 2022, OFAC sanctioned Tornado Cash, a crypto-mixing protocol, for alleged money laundering. The Treasury’s Office alleged that Tornado Cash helped Lazarus Group, a North Korean company, to siphon $455 million in stolen digital assets.
The sanctions led to the arrest of the protocol’s developer, Alexey Pertsev. Paraded before a s-Hertogenbosch Court of Appeal, Dutch judges found him guilty of money laundering. This led to a five-year and four-month prison sentence for laundering illicit digital assets.
The recent court ruling could only happen because six Tornado Cash users filed an appeal on November 26, 2024, against the OFAC’s sanctions.
The appeal clearly stated that OFAC overstepped its authority. It argues that blockchain transactions can be traced. Hence, privacy-conscious crypto users need additional privacy options.
What Does This Mean for Privacy-Preserving Technologies
The sanction on Tornado Cash initially raised concerns among privacy-preserving technologies.
No fine line was drawn between protecting those using the platform for legal activities and fishing out illegal activities.
This ruling is considered a win for the privacy-preserving community. “But regulators might view it as a setback in controlling the misuse of the crypto space.” according to Himanshu Sirohi’s X comments.
Despite the US District Court ruling for the Western District of Texas, Pertsev remains in custody. The Dutch court insists he is responsible for using his platform for illegal activities.
The court argued, “If Pertsev and the other co-founders of Tornado Cash had truly wanted to prevent criminals from abusing the protocol, they would have taken further measures to ensure security.”
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