Roman Storm, co-founder of crypto-mixing platform Tornado Cash, hopes to have charges against him dropped after sanctions against his software were dropped.
In Storm’s Dec. 18 motion to dismiss, he cites the recent Fifth Circuit ruling that the Treasury's Office of Foreign Assets Control (OFAC) overstepped by sanctioning Tornado Cash’s immutable smart contracts. The ruling recognized that autonomous software that no one controls cannot be classified as property.
The ruling, the document reads, “makes clear that there is no deliberate action Mr. Storm could have taken here.” Furthermore, “the developers’ lack of control over the proceeds renders them legally incapable of conspiring to commit money laundering and negates the knowledge element of a money laundering charge.”
Fifth Circuit Rules OFAC Overstepped in Sanctioning Tornado Cash's Immutable Smart Contracts
The U.S. Fifth Circuit Court ruled Tuesday that the Treasury overstepped by sanctioning Tornado Cash’s immutable smart contracts, stating the autonomous software cannot be classified as property. The Fifth Circuit held that when smart contracts are immutable—meaning no entity can modify or control them—they cannot be classified as "property" subject to sanctions under existing law. The decision reverses a lower court ruling and marks a significant win for privacy advocates and blockchain develop...
“Tornado Cash is difficult to control due to the immutable nature of smart contracts," Stephen Ajayi, dApp Audit Technical Lead at blockchain cybersecurity firm Hacken, told Decrypt. "It is fully decentralized, globally accessible, and hard to censor on Ethereum, which is the core principle of decentralization.”
Those points are purportedly compounded by the appeals court finding that smart contracts “are not the ‘property’ of a foreign national or entity,” and they “cannot be blocked” under the law. The creators of the contracts are also “powerless to stop” any sanctioned entity from using them.
“Mr. Storm could no more choose to stop them than he could choose to stop the sun from rising,” the document reads.
Tornado Cash is a decentralized coin mixer created to preserve crypto users' privacy by anonymizing deposits through cryptography. The service has seen inflows from wallets associated with major hacks. Due to such transactions—including some allegedly linked to North Korea—the U.S. Treasury Department sanctioned Tornado Cash in early August 2022.
Feds Blacklist Tornado Cash, Ban Ethereum Mixing Tool in US
The U.S. Treasury Department today sanctioned Tornado Cash, an Ethereum coin mixing tool. In a Monday announcement, the body added the Tornado Cash website and a long list of Ethereum addresses to its Specially Designated Nationals list, banning American citizens from using the tool or transacting with these addresses. Tornado Cash is an app that lets users make private transactions on the Ethereum network. It does this by pooling together cryptocurrency deposited by many users and mixing them...
Privacy advocates reacted positively to the recent Fifth Circuit ruling. Anoop Nannra, CEO of web3 intelligence and security firm Trugard Labs, recognized that “this is a step in the right direction.”
Nannra raised concerns about the extent of the overreach. The ruling also highlighted the issue, reading that the judges “decline the Department’s invitation to judicial lawmaking—revising Congress’s handiwork under the guise of interpreting it.”
“Legislating is Congress’s job—and Congress’s alone,” the judges highlighted. While privacy advocates welcome the ruling, the measures had limited impact.
Tornado Cash Ruling a Boon For Ethereum and DeFi Says 10X Research
The Fifth Circuit Court's ruling on Tornado Cash on Wednesday has triggered widespread optimism, with decentralized protocols on Ethereum and privacy-focused tokens seeing significant gains. On Tuesday, the court found that immutable smart contracts aren't property and can't be sanctioned under existing laws, signaling what some observers claim as a major win for privacy advocates. "While the ruling does not endorse money laundering, it establishes a precedent allowing programmers to develop and...
Still, some believe that the government should attempt to tighten its grip on cryptocurrencies further. Irfan Shaik, founder of blockchain auctions project Interstate, suggests a more extreme solution. According to him, regulators could aim for the Ethereum network by regulating how its validators act.
He explained that “the government could target users of the mixer and even punish block builders for including censored transactions in their blocks.”
He highlighted that “major builders actually censor ethereum transactions that are sanctioned.” Still, data from censorship tracking service Censorship.pics shows that Ethereum block builders censoring transactions dived from just under 70% this summer to below 5%.
Edited by Stacy Elliott.
