Tornado Cash vs USA: A Timeline

Tornado Cash and the US government have been locked in a high-stakes legal and regulatory standoff—one that has captured global attention and raised pressing questions about privacy, code, and the future of decentralized tech.

But recently, there’s been a surprising twist: the US goverment appears to be extending an olive branch by removing Tornado Cash from its global sanctions list.

To mark this potential turning point, let’s revisit the key moments that defined this landmark clash.

Quick Detour: What is Tornado Cash?

Tornado Cash allows users to obscure the origin and destination of crypto transactions by breaking the on-chain link between sender and receiver.

Here’s how it works:

• A user deposits crypto into a smart contract.

• The funds are mixed in a pool with others.

• Later, the user withdraws the same amount to a different wallet, making it difficult to trace the transaction history.

Tornado Cash became infamous due to its use by hackers such as the Lazarus Group. 

The Timeline

August 8, 2022 – OFAC Sanctions Tornado Cash

The US Treasury’s Office of Foreign Assets Control (OFAC) designates Tornado Cash as a sanctioned entity, alleging it facilitated over $7 billion in money laundering, including funds from the Lazarus Group, North Korea’s notorious hacking arm. All US persons are barred from interacting with Tornado Cash contracts.

August 12, 2022 – Developer Arrested in the Netherlands

Tornado Cash developer Alexey Pertsev, was found guilty of money laundering by a panel of Dutch judges and sentenced to five years and four months in prison. 

Prosecutors argued that the tool allowed criminals, including North Korea-linked hackers, to launder $1.2 billion in stolen cryptocurrency. The court concluded that Pertsev and other developers held de facto control over its web interface, through which most users accessed the service. They accused Pertsev of knowingly turning a blind eye to the abuse, stating that he “welcomed the bank robbers with open arms” and failed to take meaningful action to stop criminal activity, despite being aware of it. 

Pertsev’s defense maintained that he could not control how the tool was used and that punishing a developer for writing open-source code sets a dangerous precedent. However, the court emphasized that the case was not about the neutrality of code or the right to privacy, but about individual responsibility and choices.

September 2022 – GitHub Blacklists Tornado Repos

GitHub removed the Tornado Cash repository and disabling the personal accounts of its contributors—Roman Semenov, Roman Storm, and Alexey Pertsev. While this move was looked as a response to OFAC’s sanctions, the community deemed it an overreaction especially since OFAC did not name any individuals as Specially Designated Nationals (SDNs).

GitHub reversed this decision a few months later.

October 2022 – Coin Center Sues the Treasury

Coin Center filed a lawsuit against the US Treasury Department, arguing that the sanctions imposed on Tornado Cash unlawfully restricted Americans’ rights to financial privacy and free expression. The suit, which also named Treasury Secretary Janet Yellen and OFAC Director Andrea Gacki, claimed that banning interaction with Tornado Cash's smart contracts punished users who relied on the tool for legitimate privacy purposes and exposed them to unwanted surveillance. 

Plaintiffs included software developer Patrick O’Sullivan, investor David Hoffman, and a Ukraine supporter. Hoffman had been “dusted” with sanctioned ETH—meaning someone sent him a small amount of crypto from Tornado Cash without his consent—potentially triggering legal obligations and opening the door to further harassment. Coin Center argued that OFAC’s move set a dangerous precedent by sanctioning open-source code rather than a person or entity. .

Separately, Coinbase backed a similar lawsuit, with plaintiffs who had been blocked from accessing their own funds due to the sanctions. The Treasury later advised affected users to apply for a license to withdraw their assets.

April 2023 – OFAC Clarifies Sanctions Scope

OFAC issued formal guidance to clarify how its sanctions against Tornado Cash applied to users and developers. The agency confirmed that even interacting autonomously with Tornado Cash smart contracts—such as depositing or withdrawing funds directly through the blockchain without using the official front-end interface—could still be considered a violation of US sanctions law.

This clarification sent a strong message: it didn’t matter that Tornado Cash was a decentralized, non-custodial protocol without a central operator. According to OFAC, its sanctioned status extended to the underlying smart contracts, which meant that any American engaging with those contracts, even through automated scripts or self-built interfaces, was potentially breaking the law.

However, recognizing that some users had deposited funds into Tornado Cash prior to the August 2022 sanctions, OFAC stated that these individuals were not automatically at fault—but they could not withdraw their assets without permission.

August 2023 – DOJ Indicts Tornado Founders

DoJ officially charged Roman Storm and Roman Semenov, co-founders of Tornado Cash, with conspiracy to commit money laundering, sanctions violations, and operating an unlicensed money transmitting business.

Storm was arrested in Washington state, while Semenov remained at large. According to the indictment, the pair knowingly operated Tornado Cash as a tool for anonymizing illicit crypto transfers, failed to implement anti-money laundering controls, and ignored victim complaints. Even after acknowledging in private chats that a sanctions-compliance update was ineffective, they continued facilitating illegal transfers.

The charges carried potential sentences of up to 20 years for money laundering and sanctions violations, and 5 years for operating without a license.

September 2024 – Roman Storm Case Proceeds To Trial

A New York judge ruled that the US DoJ’s case against Tornado Cash developer Roman Storm would proceed to trial. District Judge Katherine Polk Failla denied Storm’s motion to dismiss, rejecting his arguments that he was being prosecuted merely for writing code and that Tornado Cash’s operations didn’t constitute a money transmitting business. The judge stated that while Storm framed the case as an attack on free speech, the court found the government's allegations plausible and the laws in question aimed at combating money laundering, sanctions evasion, and unlicensed money transmission, not at suppressing expression.

Failla also ruled that Tornado Cash was not meaningfully different from other financial institutions and pointed to profit motives, VC involvement, and the role of TORN tokens to reject the notion that it was purely an altruistic project. 

Storm had pleaded not guilty, claiming he only wrote the code, but the court ruled that criminal liability did not require awareness of specific illegal acts. Failla also denied Storm’s motion to compel the DOJ to produce materials from Dutch authorities related to Alexey Pertsev’s conviction, calling the defense’s claims speculative. 

March 2025: US Drops Tornado Cash Blacklist

OFAC removed Tornado Cash from its global sanctions list, following a federal appeals court ruling that the tool’s smart contracts could not be considered the “property” of a foreign national. Over 100 Ethereum addresses were also removed from the SDN list.

Despite the sanctions reversal, Roman Storm still faces criminal prosecution, with his trial scheduled for July. Storm’s attorney, Brian Klein, welcomed the removal of the sanctions and urged prosecutors to drop the criminal case. However, the Treasury maintained its position that North Korea continues to pose a national security threat, and noted that vacating the designation entirely could still have “disruptive consequences” for law enforcement efforts.

Ongoing Debate – Code is Speech?

 At its heart, the Tornado Cash controversy raises several complex and deeply consequential questions:

Can open-source code be sanctioned?

Traditionally, code is considered speech under US law, protected by the First Amendment. This was established in landmark cases like Bernstein v. United States, where courts ruled that publishing cryptographic code counted as a form of expressive conduct. However, the US Treasury’s decision to sanction Tornado Cash challenges that precedent. 

By blacklisting not individuals or companies but immutable code, OFAC set a controversial precedent that has alarmed developers and digital rights advocates. If this is upheld, it could mean any piece of code with dual-use potential (legitimate and illegitimate) could be considered sanctionable, even without a central actor behind it.

Are smart contracts subject to money transmitter laws?

Do decentralized protocols qualify as money service businesses (MSBs) under U.S. law? Traditionally, MSBs require licenses and must comply with KYC and AML regulations. If smart contracts are interpreted as part of a financial institution, developers may be forced to comply with these rules—even if they do not control the protocol after deployment. This could fundamentally alter how DeFi apps are built and operated.

Should developers face criminal liability for privacy tools?

This is perhaps the most alarming issue. Tornado Cash developers, including Alexey Pertsev and Roman Storm, argued they merely wrote and published code—not unlike any open-source developer contributing to a public repository. 

However, courts and prosecutors contended that their ongoing involvement, promotion, and refusal to implement safeguards made them liable for how others used the tool, even if they didn’t personally profit from or control the illicit activity. 

If upheld, this could mean developers of privacy-enhancing technologies—like mixers, ZK protocols, or even encrypted messaging systems—could be held criminally responsible if bad actors exploit their tools. 

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