OFAC and the issue of sanctions imposed against Tornado Cash have been excluded as central themes from the upcoming trial against Roman Storm, a key developer of the platform, following the decision by federal judge Katherine Polk Failla in the Manhattan district.
This choice, made official during a conference on the state of the proceedings on June 4, 2024, marks a turning point in the case that intertwines decentralized finance, privacy, and U.S. jurisprudence.
Judge’s Decision: OFAC and sanctions out of the process
During the hearing, Judge Failla expressed her opinion on the opportunity to introduce testimonies regarding the sanctions OFAC against Tornado Cash, addressing the issue with a clear ruling: as a rule, “no reference to the OFAC sanctions of August 2022” will be admitted before the jury. Although the judge left open, exceptionally, the possibility that a “unicorn” piece of evidence might emerge, which is crucial in evaluating behaviors directly related to the sanctions, the general line was firmly drawn.
The choice stems from the desire to prevent the jury from getting lost in what Failla described as “mental gymnastics,” tempted by having to understand the entire history of the sanctions: their imposition in August 2022, the subsequent removal in March 2024, and the declaration of illegality by a Texas court. Consequently, the legal complexity and the mutability of the regulations were considered potentially misleading for the impartial evaluation of the facts contested to Roman Storm.
Timing and Context of OFAC Sanctions on Tornado Cash
The OFAC sanctions marked one of the most tumultuous episodes in recent history between technofinance and regulation. The decision to sanction Tornado Cash dates back to August 2022, when the U.S. Treasury Department accused the platform of facilitating money laundering practices through the anonymization of transactions. In March 2024, the same administration, under a court order from Texas through the case Van Loon v. Department of the Treasury, revoked the sanctions, ultimately deeming them illegal.
During the Manhattan conference, Judge Failla also prohibited any reference by the parties to the case “Van Loon v. Treasury Department,” considered an essential element in the overturning of the sanctions.
The other pre-trial motions on the table
The defense of Roman Storm had filed additional pre-trial motions (motions in limine) to exclude certain particularly sensitive evidence and arguments. However, Judge Failla granted only one of them, while the others were denied:
Lazarus Group: the connections of Tornado Cash with the North Korean hacker group may be discussed and cited during the trial.
Sales of TORN: the jury will be able to hear testimonies regarding the favorable profits that Storm would have obtained thanks to the sale, after the sanctions, of 12 million dollars in TORN tokens and the purchase of real estate.
“Inflammatory” characterizations: they may be used by public prosecutors against the alleged operations of Storm.
The role of the Bank Secrecy Act (BSA) and AML/KYC procedures
The prosecutors have specified that they will not charge Roman Storm with violating the Bank Secrecy Act for failing to implement anti-money laundering (AML) and know-your-customer (KYC) systems on Tornado Cash. However, the prosecution’s expert witnesses will testify that Storm could have, and deliberately chose not to adopt, similar security measures for the platform.
Key evidence: the report of Alexey Pertsev’s phone
A crucial point concerns the admission as evidence of the information obtained from the phone of Alexey Pertsev, a colleague of Storm and co-developer of Tornado Cash. The Dutch government allowed the FBI access to an official report on the data contained in the device. Subsequently, an FBI special agent produced a selective summary of the contents deemed relevant. Storm’s defense attempted to exclude such evidence, arguing that the report was “cherry-picked” and not authenticatable. Nonetheless, Judge Failla ruled that the report remains admissible.
Expert Testimonies: Limits and Admissions
After an extensive debate between the prosecution and defense regarding the expert witnesses, Judge Failla authorized all the testimonies scheduled for the trial, however establishing precise “course corrections” on the topics that can be addressed by the experts from both bull and bear sides.
Defensive strategies and limits: privacy and the First Amendment
A central aspect in defense strategies will be the possibility for Storm to address the issue of privacy rights, topics dear to the cryptocurrency ecosystem. However, Judge Failla has already clarified that if Storm chooses to testify in court, they cannot invoke the protection of the First Amendment (free speech) regarding the activities conducted with Tornado Cash. According to Failla, freedom of speech should not become a point of contention in this proceeding, considering it more appropriate to limit the discussion to the material facts and the declared intentions of Storm.
Next steps and future scenarios
The final pre-trial conference will be held via telephone at 3:00 PM (Eastern Time) on Friday, while the trial will begin on the next June 14 and will last for about four weeks. The Storm case, beyond the single defendant, continues to represent a watershed for regulation and jurisprudence on blockchain, privacy, and developer liability. In a global landscape where the dichotomy between decentralized innovation and regulatory rigor remains very relevant, the case will offer valuable signals on the future boundaries between law and technology.
The court’s decision to exclude the topic of OFAC sanctions underscores the urgency of clear approaches when law and technology meet. As the trial approaches, observers and operators in the blockchain sector are closely watching the developments of this debate, which could redefine the responsibilities of developers of decentralized systems.