Tornado Cash Co-Founder Seeks to Have Charges Dropped After Court Ruling

Roman Storm, co-founder of the cryptocurrency mixing platform Tornado Cash, has filed a motion to have the criminal charges against him dismissed following a recent court ruling that undermines the U.S. Treasury's sanctions against the platform. Storm’s motion, filed on December 18 in a Manhattan district court, argues that an appeals court decision in November 2023 found that the U.S. government had overstepped its authority by sanctioning Tornado Cash’s smart contracts.

Court Ruling Challenges Sanctions on Tornado Cash

The legal battle stems from a Fifth Circuit Appeals Court ruling that found the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) had unlawfully sanctioned Tornado Cash’s smart contracts, which are self-executing programs that automate transactions on the Ethereum blockchain. The court’s decision, which came from a separate case involving Tornado Cash users, stated that the smart contracts, being immutable and decentralized, are not “property” that can be controlled or blocked under U.S. law, particularly the International Emergency Economic Powers Act (IEEPA), which grants the Treasury the authority to enforce sanctions.

In its opinion, the court highlighted that Tornado Cash's smart contracts are unchangeable and available for use by anyone, including sanctioned individuals or entities like the North Korean-linked hacking group Lazarus. The court emphasized that the creators of Tornado Cash, including Storm, were powerless to alter or halt the use of the platform, likening their control over the contracts to being unable to “stop the sun from rising.”

Legal Flaws in the Indictment

Storm’s legal team has argued that this appeals court decision exposes critical flaws in the charges against him. In his motion, Storm asserts that the criminal indictment brought against him in August 2023, which includes charges of conspiring to violate IEEPA, operating an unlicensed money-transmitting business, and money laundering, should be dismissed.

Storm points out that the appeals court’s ruling has a direct impact on the charge related to the IEEPA, particularly the argument that the smart contracts cannot be considered the “property” of a foreign national or entity and therefore cannot be subject to sanctions. This, according to Storm, renders the charge against him for conspiring to violate IEEPA “fatally flawed.”

Tornado Cash's Immutable Nature

Storm further contends that Tornado Cash is not a traditional financial institution and that its decentralized nature—especially after its protocol became immutable in May 2020—precludes the possibility of operating an unlicensed money-transmitting business or engaging in money laundering. He argues that there could have been no agreement to launder money, as the platform’s code, once made immutable, effectively made the protocol incapable of being changed or controlled by its creators.

Background of the Case

The charges against Storm and Roman Semenov, another co-founder of Tornado Cash, stem from accusations that they aided in laundering over $1 billion in cryptocurrency, including funds tied to the Lazarus Group, a notorious hacking collective with links to North Korea. Semenov, a Russian national, remains at large, while a third co-founder, Alexey Pertsev, was arrested in the Netherlands in August 2022 on related charges and is currently in pre-trial detention.

The case has been closely watched, particularly given its implications for the broader cryptocurrency and decentralized finance (DeFi) space. The November 2023 ruling from the Fifth Circuit, which involved a lawsuit filed by six Tornado Cash users (with backing from Coinbase), directly challenged the Treasury's sanctions and brought into question the legality of regulating decentralized protocols in this manner. Initially, the plaintiffs lost the case but successfully appealed the decision, which could have a significant impact on future legal actions against decentralized financial services.

What’s Next for the Case?

As Storm seeks to have the charges against him dropped, his legal team is using the Fifth Circuit’s ruling as a key argument for why the indictment is no longer valid. If the court agrees, this could set a significant precedent for the regulation of decentralized platforms and the authority of U.S. agencies like OFAC in sanctioning blockchain protocols.

While the legal battle continues, the Tornado Cash case is drawing attention to the larger question of how the U.S. government can regulate decentralized technologies and whether smart contracts—as may be autonomous, self-executing pieces of code—should be treated as property or as tools beyond the control of their creators.

As the case progresses, it could not only affect Storm and his co-founders but also shape the regulatory landscape for the entire crypto mixing industry and the broader world of decentralized finance. The outcome of this case may be a significant step toward clarifying how governments will approach blockchain technologies and whether they can regulate software code in the same way they regulate traditional financial institutions.