U.S. Treasury Lifts Tornado Cash Sanctions Amid North Korea Money Laundering Probe

 The U.S. Treasury Department has decided to lift sanctions on Tornado Cash, a cryptocurrency mixing service previously linked to money laundering activities involving the North Korea-backed Lazarus Group. The decision follows a review of legal and policy concerns related to financial sanctions in evolving technological and legal environments. As part of this action, more than 100 Ethereum (ETH) wallet addresses are being removed from the Specially Designated Nationals (SDN) list.

 

 

 

In August 2022, the Office of Foreign Assets Control (OFAC) placed Tornado Cash on its sanctions list, citing its use in laundering over $7.6 billion in virtual assets since 2019.

However, in November 2024, the U.S. Fifth Circuit Court overturned this decision, stating that OFAC exceeded its legal authority by sanctioning the cryptocurrency mixer. The court ruled that Tornado Cash’s immutable smart contracts could not be classified as "property" under the International Emergency Economic Powers Act (IEEPA) since no single entity controls them.

Court documents further noted that, without a controlling party, there is no legal basis for a contract involving the smart contracts. Despite this ruling, the Treasury Department reaffirmed its commitment to preventing cybercriminals from exploiting digital assets and pledged continued efforts to restrict North Korea’s funding of weapons and missile programs.

"Digital assets present enormous opportunities for innovation and value creation for the American people," said Secretary of the Treasury Scott Bessent.

"Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership and ensuring that the American people can benefit from financial innovation and inclusion."

Last May, a Dutch court on Tuesday sentenced Alexey Pertsev, one of the co-founders of Tornado Cash, to 5 years and 4 months in prison. Two of its other founders Roman Storm and Roman Semenov were indicted by the U.S. Department of Justice in August 2023.