James Harden: Legal Charge, Trade Requests, and Relationships

The U.S. Department of the Treasury’s sanction on Tornado Cash on August 8, 2022, sent a shockwave through the cryptocurrency world, branding a piece of software as a threat to national security. Over two years later, the legal battles and their implications for privacy, code, and financial freedom continue to unfold.

44 wallet addresses sanctioned · $7 billion laundered (alleged) · 64 months prison (Pertsev) · 2 jurisdictions, differing verdicts

What Is Tornado Cash?

• Open-source, non-custodial Ethereum mixer.
• Uses smart contracts to break on-chain link between sender and recipient.
• Immutability means code cannot be altered after deployment.

Sanctions Details

• OFAC added 44 smart contract wallet addresses to SDN List on August 8, 2022.
• U.S. persons banned from interacting with those addresses.
• Circle froze USDC on sanctioned addresses; GitHub deleted code.

Legal Challenges

• Coinbase-funded lawsuit Van Loon v. Treasury challenges OFAC’s authority over immutable code.
• Fifth Circuit heard oral arguments in November 2024; ruling expected late 2024/early 2025.
• Outcome could set national precedent on sanctioning software.

Developer Trials

• Alexey Pertsev (Netherlands): convicted of money laundering, 64 months.
• Roman Storm (U.S.): acquitted on substantive money laundering, hung on conspiracy.
• Legal fragmentation: same act, different outcomes across borders.

Key Facts: Tornado Cash Sanctions

Fact	Detail
Sanctioning authority	U.S. Treasury, OFAC
Targets	44 Ethereum smart contract addresses
Alleged laundered volume	$7 billion since 2019, including $455M from Lazarus Group
Developer convicted	Alexey Pertsev (Netherlands) – 64 months
Developer acquitted (in part)	Roman Storm (U.S.) – acquitted on money laundering; retrial possible on conspiracy
Key lawsuit	Van Loon v. Treasury – Fifth Circuit appeal

Timeline: The Major Events

The chronology below highlights the moments that turned a privacy tool into a legal battleground.

Date	Event	Key Actors	Consequence
Aug 8, 2022	OFAC sanctions Tornado Cash, adding smart contract wallet addresses to the SDN List.	U.S. Treasury, OFAC	Immediate seizure of funds by Circle (USDC issuer); GitHub deletes developer code.
Aug 24, 2022	Coinbase funds a lawsuit against OFAC, filed by six plaintiffs including Tornado Cash users and developers.	Coinbase, Paul Grewal (Chief Legal Officer)	Legal challenge begins; case assigned to federal judge in Texas.
Nov 8, 2024	Oral arguments in Van Loon v. Treasury heard before the Fifth Circuit Court of Appeals.	Fifth Circuit, Coinbase legal team, DOJ	Judges appeared skeptical of OFAC’s authority to sanction immutable software.
Nov 26, 2024	Developers Alexey Pertsev and Roman Storm face trial in the Netherlands for money laundering.	Dutch judiciary, Alexey Pertsev, Roman Storm	Pertsev sentenced to 64 months; Storm acquitted in the U.S. on money laundering charges but jury hung on conspiracy.
Late 2024 / Early 2025	Fifth Circuit expected to rule on Van Loon v. Treasury. The outcome could set a national precedent.	Fifth Circuit	Potential affirmation or overturning of OFAC’s sanctions authority over software.

Timeline Significance: The legal offensive shifted from the initial shock of the sanction to a courtroom battle that directly questions whether the government can prohibit open-source code. The simultaneous criminal cases in the U.S. and Netherlands show that developers, not just users, are in the crosshairs.

Confirmed Facts and Key Developments

What the Sanctions Actually Blocked

The Treasury Department’s action was unprecedented. They did not just sanction a company or individuals; they sanctioned 44 Ethereum wallet addresses associated with Tornado Cash. This immediately made it illegal for any U.S. person or entity to interact with those addresses. The impact was swift: Circle, the issuer of the USDC stablecoin, blacklisted those addresses, effectively freezing millions of dollars. GitHub, the code repository, deleted the Tornado Cash developer accounts and code.

What remains is a legal grey area. The Treasury argued that Tornado Cash “assists” in money laundering, citing the $7 billion in crypto allegedly laundered through the service since 2019, including $455 million from the Lazarus Group, a North Korean hacking collective. However, the core of the lawsuit is that Tornado Cash is software—immutable, open-source code that runs on its own—not a person, company, or property that can be sanctioned. The plaintiffs contend that sanctioning code violates the First Amendment, property rights, and the separation of powers.

“Tornado Cash is software—immutable, open-source code that runs on its own—not a person, company, or property that can be sanctioned.” — Plaintiffs in Van Loon v. Treasury

Treasury’s original press release states the sanctions target “financial institutions” involved in money laundering, but critics argue a smart contract is not an institution.

The Developer Trials: A Tale of Two Jurisdictions

The most chilling development for coders came from the criminal cases. In the Netherlands, Alexey Pertsev, the lead developer, was arrested in August 2022 and later sentenced to 64 months in prison for money laundering. The court found that he “facilitated” criminal activity by writing the code, even though he had no control over how it was used. In the United States, Roman Storm was arrested and charged with conspiracy to commit money laundering and operating an unlicensed money transmitter. However, a key twist occurred when a U.S. judge dismissed the money transmission charge and the jury acquitted him on substantive money laundering, though they were hung on conspiracy. Storm is now awaiting a potential retrial.

The discrepancy is stark. In the U.S., the judge acknowledged that writing code might not constitute “money transmission,” but the Dutch court convicted Pertsev for the same act. This creates a legal fragmentation: a developer is a criminal in the Netherlands but potentially not in one U.S. federal court. The Fifth Circuit’s ruling in the civil case will influence how U.S. criminal courts treat code as “property” or “speech.”

“The core legal question remains unresolved: Can the government sanction immutable, self-executing code that no one controls?” — Neutral observer

What This Means for Stakeholders

The outcome of this saga will reshape the landscape for three key groups:

• For Developers: The message is contradictory. In the Netherlands, you can be jailed for writing privacy code. In the U.S., the courts are split. The safest bet for now is to move to jurisdictions with clear protections for free speech and open-source software. The Fifth Circuit ruling could provide a safe harbor in America, or it could open the floodgates to more sanctions on code.
• For Crypto Users and Investors: The risk of using privacy tools has never been higher. If the sanctions are upheld, any interaction with Tornado Cash or similar mixers becomes a federal crime. However, if the lawsuit succeeds, we may see a rush of renewed innovation in privacy-preserving protocols. The market is already pricing in this uncertainty. For example, the price of privacy coins like Monero has seen volatility on legal news, reflecting investor sentiment that the infrastructure itself is at risk.
• For Regulators: The Treasury’s goal is clear: stop North Korea from funding its weapons program via crypto. According to Bitcoin Insider, the Lazarus Group had already stolen over $1 billion in crypto by mid-2022. However, a win for the plaintiffs would force the Treasury to seek new legislation to target the service layer, rather than the code itself. This could lead to a debate in Congress about what constitutes a “financial institution” in the decentralized world.

The pattern: Each ruling creates more fragmentation until a higher court (potentially the Supreme Court) sets a national standard.

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FAQ: Common Questions About Tornado Cash

Can I still use Tornado Cash?

If you are a U.S. person, no. It is a federal crime to interact with the sanctioned addresses. Non-U.S. persons face legal risk depending on local laws. The service still technically runs on the Ethereum blockchain, but its front-end interfaces are shut down.

Is writing privacy code illegal now?

Not automatically, but it’s risky. The cases against Storm and Pertsev show that prosecutors will argue that writing code that enables privacy is “conspiracy” or “money laundering.” The law is not settled, and a positive ruling in the Fifth Circuit could protect code as speech.

What happens if the Fifth Circuit overturns the sanctions?

If the court finds that OFAC exceeded its authority, the sanctions would be lifted. This would mark a huge win for the crypto industry and free speech advocates. It would also force the Treasury to go to Congress if it wants new powers to target software.

Why did the Dutch court convict Pertsev but the U.S. jury acquit Storm?

Different legal systems. The Dutch court applied a broad definition of “facilitation” of money laundering, focusing on the potential harm of the tool. The U.S. jury seemed to accept the defense that Storm was simply publishing software, not transmitting money. The U.S. judge also preemptively dismissed the “money transmission” charge, narrowing the prosecution’s case.

Why was Tornado Cash sanctioned?

The U.S. Treasury alleged that the service facilitated money laundering, particularly by North Korea’s Lazarus Group, which used it to launder $455 million from a 2022 hack. OFAC designated the smart contracts as a “financial institution” under the IEEPA, making any interaction illegal for U.S. persons.

Related Reading

• CoinDesk: Tornado Cash Sanctions Lawsuit Heads to Fifth Circuit
• The Block: Roman Storm Trial Coverage
• U.S. Treasury: Original Press Release on Tornado Cash Sanctions