A federal judge at the United States District Court for the Southern District of New York has blocked any mention of a key court victory for crypto privacy advocates during the upcoming criminal trial of Ethereum coin mixer Tornado Cash’s developer Roman Storm, dealing a setback to the defense.
District Judge Katherine Polk Failla declared during a Tuesday hearing that “The words ‘Van Loon’ are not going to show up in this trial,” referring to the Van Loon vs. Department of the Treasury case in which a Fifth Circuit Court ruled that “immutable smart contracts are not property because they are not capable of being owned.”
In March, the OFAC quietly removed sanctions it imposed on Tornado Cash in 2022, and the next month a judge finalized the decision, permanently barring the Treasury from reimposing them.
The Tuesday hearing, a final status conference before Storm’s trial begins July 14, focused primarily on motions to exclude evidence and witness testimony.
Judge Failla expressed concern that allowing discussion of the Van Loon case would “confuse the jury,” despite the ruling’s significance in finding that the Treasury’s Office of Foreign Assets Control overstepped its authority when it sanctioned the coin mixer.
The judge’s statement comes at a critical moment for the crypto industry, as Storm’s case has triggered debates on whether software developers can be held criminally liable for how their code is used.
Judge Failla also urged both sides to limit references to North Korea’s weapons of mass destruction program, though she hasn’t made a formal ruling on the matter.
“Mental gymnastics”
Dhrupad Das, Web3 lawyer and founding partner at Panda Law, explained that Judge Failla may have barred mention of the Van Loon ruling for three evidence-law reasons.
“Judge Failla excluded references to the Van Loon judgment during Roman Storm’s trial primarily because it dealt with civil interpretations of OFAC’s authority under IEEPA, not criminal liability,” Das told Decrypt.
“A Fifth Circuit judgment does not bind a Second Circuit district court” and its legal conclusions “could only be offered as persuasive authority, which is material for motions, not for the jury,” he said.
Das noted that in ruling on the defense motion in limine, Failla said jurors would need “mental gymnastics” to follow why OFAC sanctioned Tornado Cash, why those sanctions were later withdrawn, and how a Texas court then held them unlawful.
“She concluded that the limited probative value of that story was outweighed by the danger it would distract or mislead,” he added.
What is Tornado Cash?
Founded in 2019 by Alexsey Pertsev and Roman Storm, Tornado Cash is a non-custodial coin mixer servicing the Ethereum network. Coin mixers are services that enable users to mask the origin and destination of transactions—making them a key battleground in the clash between privacy advocates and the authorities.
Storm’s trial marks the culmination of a three-year legal battle that began in August 2022, when the OFAC sanctioned Tornado Cash for allegedly helping launder over $7 billion, including funds tied to North Korea’s Lazarus Group.
In 2023, the DOJ indicted Storm for conspiring to commit money laundering, evade sanctions, and operate an unlicensed money-transmitting business, charges now at odds with the DOJ’s new policy to drop similar cases.
Storm’s legal team had hoped to leverage the Van Loon victory, which established that immutable smart contracts cannot be classified as “property” under existing sanctions law.
While civil courts have limited the Treasury’s regulatory reach, Storm’s case hinges on whether he knowingly facilitated criminal activity through the Tornado Cash protocol.
Prosecutors point to Storm’s actions after OFAC imposed sanctions, including Google searches, a $12 million TORN token sale, and ceding control of the app, as evidence of intent.
With Tuesday’s appellate dismissal extinguishing the final civil challenge to OFAC sanctions, Storm’s defense can no longer argue immunity based on legal vacatur of the designation.
All eyes now turn to whether the jury will see his actions after the imposition of sanctions, and before delisting, as criminal. If convicted, he faces up to 45 years behind bars.
