TORN Price Surges Over 400% as US Court Rules Treasury Sanctions on Tornado Cash Unlawful

Highlights:

• The court opposed the US Treasury’s sanctions on Tornado Cash, citing overreach of legal authority.
• Tornado Cash’s smart contracts can’t be blocked under the IEEPA, court rules.
• Tornado Cash native token jumps over 400% after legal victory.

On November 26, a three-judge panel from the 5th US Circuit Court of Appeals in New Orleans ruled against the Treasury Department’s sanctions on cryptocurrency mixer Tornado Cash. The panel determined that the Treasury Department’s Office of Foreign Assets Control (OFAC) exceeded its legal authority by sanctioning the software itself rather than specific individuals or entities. 

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Tornado Cash’s immutable smart contract cannot be classified as “property” and can’t be blocked under the International Emergency Economic Powers Act (IEEPA) and related laws. The department has a right to seal assets but can’t target technology, as it is “not the ‘property’ of a foreign individual or entity,” the court ruled.

BIG NEWS: Federal appeals court says Treasury overstepped its authority when sanctioning immutable smart contracts deployed by the @TornadoCash devs because they are NOT property of a foreign person or entity.

"The immutable smart contracts at issue in this appeal are not… pic.twitter.com/1tPhRPmgVE

— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) November 26, 2024

U.S. Treasury and OFAC Blacklist Tornado Cash Over Laundering Concerns

The US Treasury and its OFAC department blacklisted Tornado Cash in 2022 due to concerns it was being used to launder billions of dollars stolen in cyberattacks, particularly those linked to North Korea’s Lazarus Group. The agency revealed that Tornado Cash facilitated the laundering of over $7 billion in virtual currency since 2019.

Tornado Cash’s usage dropped sharply after U.S. sanctions. Monthly deposits fell by over 90%, showing the impact of the sanctions. The sanctions prohibited U.S. persons from using the service and blacklisted associated Ethereum addresses.

In 2024, Tornado Cash saw a major revival. Despite legal challenges, regulatory scrutiny, and the arrest of developer Alexey Pertsev, activity surged. Blockchain analytics firm Flipside Crypto reported that the service processed over $1.8 billion in deposits during the first half of the year.

Circuit Judge Don Willett acknowledged the government’s concerns about foreign entities laundering money through the software. However, he clarified that federal law permits the Treasury to target property, not the software itself.

Willett said:

“Perhaps Congress will update (the law), enacted during the Carter Administration, to target modern technologies like crypto-mixing software. Until then, we hold that Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the ‘property’ of a foreign national or entity, meaning they cannot be blocked.”

TORN Price Surges After Tornado Cash Secures Major Legal Victory

TORN, the native token of the Tornado Cash ecosystem, has been one of the top performers in the market over the past 24 hours. The Tornado Cash native token, TORN, surged over 850% following the verdict, soaring from $3.60 to peak at $35 in early Asia trading. 

Tornado Cash $TORN jumped as much as 700% after US court rules sanctions placed against Tornado Cash crypto mixer were unlawful. pic.twitter.com/yLxPMAomjX

— CoinGecko (@coingecko) November 27, 2024

At the time of writing, TORN has pulled back to around $18, still reflecting a gain of over 400% in the past 24 hours.

Coinbase’s CLO Calls Ruling a Win for Privacy and Crypto Industry

Paul Grewal, Coinbase’s Chief Legal Officer (CLO), called the ruling a significant victory for privacy advocates and the crypto industry. 

In a social media post, Grewal said:

“These smart contracts must now be removed from the sanctions list, and U.S. persons will once again be allowed to use this privacy-protecting protocol.”

Grewal also emphasized that while combating illicit activity is crucial, banning open-source technology due to its misuse by a small group exceeds the Treasury’s authority.

Privacy wins. Today the Fifth Circuit held that @USTreasury’s sanctions against Tornado Cash smart contracts are unlawful. This is a historic win for crypto and all who cares about defending liberty. @coinbase is proud to have helped lead this important challenge. 1/6

— paulgrewal.eth (@iampaulgrewal) November 26, 2024

Moreover, Bill Hughes, senior counsel at Consensys, described the ruling as a “good win.” He believes the Supreme Court is unlikely to reverse it. However, he clarified that the victory doesn’t mean the protocol is free from regulatory scrutiny. The case specifically addressed smart contracts without an admin key.

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