Tornado Cash's contracts were sanctioned, then ruled not property

Inherited archive entry · retained from the earlier edition. Its factual, legal and policy claims have not all been reverified for 19 September 2026. Research scope.

A designation, then a reversal in court

On 8 August 2022, the Treasury's Office of Foreign Assets Control designated Tornado Cash, an Ethereum-based mixing tool, adding its website, an address and dozens of smart contracts to the sanctions list. The designation announcement stated that the tool had 'been used to launder more than $455 million stolen by' the North Korea-linked Lazarus Group, among other laundering it described. Six users sued, and on 26 November 2024 the Fifth Circuit ruled, in an opinion in Van Loon v. Department of the Treasury, that OFAC had exceeded its authority. On 21 March 2025, Treasury removed the designation, citing its filing in that case.

Mutable versus immutable was the pivot

The court's opinion explains that Tornado Cash's pooling contracts were made permanently unchangeable in 2020, through a 'trusted setup ceremony' in which the developers gave up any ability to alter, remove or control the code. That distinction, between a contract someone can still change and one nobody can, was the entire case. The statute lets Treasury block 'property' in which a sanctioned party has an interest. The court held that an immutable smart contract is not property because it is 'not capable of being owned': no one can exclude anyone else from using it, and the developers who wrote it are, per the opinion, as powerless to stop a use they dislike as anyone else on the internet.

What the ruling settles and what it leaves open

The court did not hold that mixing tools are beyond regulation generally, and it left untouched separate criminal charges against individual developers, which the opinion notes but does not adjudicate. It also left open whether Tornado Cash counts as a foreign 'entity' at all, or whether such an entity would have an 'interest' in a mutable contract, since the immutability finding alone decided the case. The opinion is direct that this leaves a gap: because the contracts keep running regardless of the sanctions, it states plainly that 'the targeted North Korean wrongdoers are not actually blocked from retrieving their assets' by a designation of this kind. Treasury's own delisting statement repeated that it remains 'deeply concerned' about DPRK-linked laundering even as it withdrew the designation, a statement of continuing policy concern, not a finding that the underlying laundering concern was wrong.

Questions to carry forward

• Does a future sanctions action target a mutable component, such as a relayer registry, rather than an immutable pool contract, to fit within this ruling?
• What outcome do the separate criminal cases against individual Tornado Cash developers reach, and on what conduct rather than on the software itself?
• Has Congress amended IEEPA, which the opinion notes predates the modern internet, to address unownable software directly?

Three documents mark three distinct decisions: a designation aimed at software regardless of ownership, a court ruling that ownership is exactly what the statute requires, and a withdrawal that left the policy concern stated but the legal tool narrowed. None of the three resolves what happens to the next tool built to be similarly unownable.