OFAC sanctions immutable smart contract code, not just its authors — and a court eventually says no

AUG 08 2022 · 12:15

Video: How the Tornado Cash Lawsuit Was Won and Why It Matters Date: 2022-08-08 · Type: failure · Tags: ofac, sanctions, privacy, tornado-cash, crypto-wars, developer-liability, immutability, fifth-circuit The first time the U.S. government added software to the Specially Designated Nationals list On August 8 2022, the U.S. Treasury's Office of Foreign Assets Control added Tornado Cash to the SDN list — not its operators, not a company, but the smart contract addresses themselves. The action was the first time IEEPA's property-blocking authority was applied to immutable, ownerless code, and it sent an immediate legal shock through every developer building privacy infrastructure. GitHub removed the repository within hours. Circle blocked USDC in affected addresses. The week that followed was the starkest demonstration since PGP of how financial-infrastructure pressure can enforce compliance faster than any court order. Two days later, Dutch financial-crimes authority FIOD arrested Alexey Pertsev in Amsterdam. The timing was conspicuous — the Dutch action had clearly been coordinated. Pertsev was convicted by a Dutch court in May 2024 and sentenced to 64 months, the most significant prison term yet given to a developer for writing privacy software. The Dutch proceedings, conducted under a different legal framework than the American cases, largely avoided the First Amendment questions that dogged the U.S. prosecutions. The American sanctions themselves were substantially overturned on November 26 2024, when the Fifth Circuit held in *Van Loon v. Department of the Treasury* that immutable smart contracts are not "property" within the meaning of IEEPA — a ruling that drew directly on the same logic as the 1990s Bernstein and Junger cases, which had established that source code is speech. OFAC formally delisted Tornado Cash on March 21 2025. The arc — government overreach, legal challenge, partial vindication — replayed the crypto wars in compressed form, with the added variable that the underlying technology, unlike PGP, cannot be unpublished. Facts • OFAC SDN listing: August 8 2022 — first time immutable smart contract addresses sanctioned • Pertsev arrest (Amsterdam, FIOD): August 10 2022 • Storm and Semenov indictment (S.D.N.Y.): August 23 2023 • Pertsev verdict: May 14 2024, Dutch court, 64 months • Van Loon v. Treasury, Fifth Circuit: November 26 2024 — sanctions held unlawful as applied to immutable contracts • OFAC formally delists Tornado Cash: March 21 2025 • GitHub removed the Tornado Cash repository within hours of the August 8 listing Primary Documents • OFAC press release on Tornado Cash sanctions (Aug 8 2022) — https://home.treasury.gov/news/press-releases/jy0916 • DOJ indictment: United States v. Storm and Semenov (S.D.N.Y. Aug 23 2023) — https://www.justice.gov/usao-sdny/pr/tornado-cash-founders-charged-money-laundering-and-sanctions-violations • Van Loon v. Department of the Treasury, 5th Circuit opinion (Nov 26 2024) — https://www.ca5.uscourts.gov/opinions/pub/23/23-50669-CV0.pdf