On Nov. 26, 2024, the U.S. Court of Appeals for the Fifth Circuit struck down the U.S. Department of the Treasury’s Aug. 8, 2022, designation of Tornado Cash on the U.S. sanctions list (SDN List). Tornado Cash is a cryptocurrency mixing service allegedly used to launder illicit funds—$7 billion worth—including $455 million allegedly stolen by the Lazarus Group, a North Korean hacking group. This court ruling, which limits what can be designated or sanctioned by the U.S. government, has been hailed as a victory for the crypto industry, and it could also carry implications for the future of OFAC enforcement in a post-Loper Bright reality.

Courts have been notoriously reluctant to question the authority of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) on matters relating to designations and blocked property. OFAC operates at the intersection of foreign policy and national security; two domains where courts grant much deference to executive agencies. With the demise of Chevron deference, many practitioners have questioned whether even OFAC will face heightened scrutiny in the courts.