OFAC Crypto Sanctions Lawyer — Unblock Wallets & SDN Defense

OFAC can designate cryptocurrency wallet addresses as SDN entries. Once designated, all U.S. persons must block transactions with that address. Our lawyers challenge designations and coordinate SDN removal.

Blockchain transparency lets regulators combine wallet tracing, IP logs, onboarding files, and withdrawal patterns into a coherent sanctions narrative, which is exactly why OFAC published its Sanctions Compliance Guidance for the Virtual Currency Industry. Pseudonymity is limited. Bad records stay visible. An OFAC crypto compliance lawyer helps prevent that record from forming in the first place. 

Strict liability makes prevention more valuable than excuses, because OFAC says civil liability can exist even when a U.S. person lacked knowledge or reason to know of the violation. Our defense team therefore builds controls first and arguments second. That order usually matters. 

A typical engagement usually covers four workstreams grounded in OFAC’s guidance and enforcement practice: 

Most crypto sanctions cases start with operational gaps, not cartoon-villain intent, because OFAC generally applies a strict liability standard in civil matters. That means accidental exposure still counts. Weak controls on legacy accounts, smart contracts, hosted wallets, and withdrawal flows can become expensive very quickly. 

The public cases tell the same story. Kraken settled after failing to apply adequate geolocation controls to later transactional activity, Poloniex settled after serving users in Crimea and other sanctioned jurisdictions, and Bittrex paid more than $24.2 million after compliance deficiencies let users in Crimea, Cuba, Iran, Sudan, and Syria transact on its platform. 

Exposure often begins when a platform or investor receives value linked to an SDN or blocked service and treats it as a routine AML issue rather than blocked property. That is risky. An OFAC virtual currency lawyer should immediately assess whether the funds must be blocked, reported, or addressed through a license strategy. OFAC says blocked virtual currency must be reported within 10 business days and then annually while it remains blocked. 

Mixer-related actions show how fast this area moves. Treasury sanctioned Blender.io in May 2022, designated Tornado Cash in August 2022, redesignated it in November 2022, and later removed Tornado Cash from the SDN List in March 2025. Historical exposure still matters. Current list status matters even more. 

Tornado Cash
In August 2022, OFAC designated the Ethereum mixer Tornado Cash as an SDN, blocking dozens of associated smart-contract addresses over allegations that North Korea’s Lazarus Group used it to launder stolen funds. The case became a landmark legal battle: in November 2024, the Fifth Circuit ruled that OFAC had exceeded its authority, holding that immutable smart contracts aren’t “property” that can be blocked under IEEPA since no one — not even Tornado Cash’s developers — can control or own them. In March 2025, Treasury formally delisted Tornado Cash, removing over 100 associated addresses from the SDN List. The case remains the key precedent for challenging sanctions against decentralized, non-custodial protocols.

Lazarus Group
The North Korea-linked Lazarus Group is OFAC’s most frequently cited threat actor in the crypto space, tied to billions in stolen virtual currency from exchange hacks and laundered through mixers and cross-chain bridges. OFAC has designated numerous wallet addresses directly linked to Lazarus Group activity, and exchanges are expected to screen against these addresses on an ongoing basis, not just at onboarding.

Wallet Types Subject to Designation
OFAC has designated a range of address types beyond simple custodial wallets, including deposit addresses, routing addresses used by mixing services, and proxy addresses that obscure the path of funds. This means screening must go beyond checking a counterparty’s primary wallet — it requires monitoring for indirect exposure through addresses that interact with sanctioned infrastructure.

The OFAC Designation Process for Virtual Assets
When OFAC identifies a wallet address tied to sanctions evasion, terrorism financing, or a state-sponsored actor, it adds the address directly to the SDN List, typically alongside the designated individual or entity. Once published, all U.S. persons — including exchanges, custodians, and individual holders — must immediately block any transaction touching that address and file a blocking report within 10 business days. Designations can later be challenged or reversed, as the Tornado Cash case demonstrated, but the burden falls on the designated party to petition for reconsideration or pursue judicial review.

A sanctions problem is often really a controls problem, even when the headline mentions only a wallet or jurisdiction. No retroactive KYC review. No transactional IP screening. No testing. No escalation path for suspicious blockchain activity. That pattern appears again and again in OFAC’s crypto settlements. 

Kraken’s matter centered on inadequate IP blocking during ongoing account activity, while Poloniex failed to apply controls consistently to pre-existing users and sanctioned jurisdictions. Bittrex had customer information that created clear sanctions risk but did not screen it effectively. Controls must address comprehensively sanctioned jurisdictions such as Iran and North Korea, and also Russia-related SDN and evasion exposure. This is where a crypto exchange OFAC violation lawyer becomes essential. 

The numbers are severe enough to threaten a platform, fund, or founder long before a case is fully resolved. For IEEPA-based sanctions, the current civil maximum is the greater of $377,700 per violation or twice the value of the transaction, while criminal penalties for willful violations can reach $1,000,000 and 20 years in prison. Treasury updates civil figures over time, so stale blog posts often understate the risk. 

A crypto sanctions attorney should compare the statutory ceiling with the likely base penalty, aggravating facts, and mitigation credits. Voluntary self-disclosure still matters. Cooperation still matters. Remediation still matters. 

An OFAC subpoena is not a box-checking exercise, and it is rarely the right moment to tell a broad story before the facts are pinned down. First comes document preservation. Then wallet tracing. Then a clean chronology showing who touched what, when, and under which jurisdictional theory. 

OFAC’s own production standards say subpoena responses should be organized in the order of the requests and submitted in a logical, easy-to-review format. That sounds mechanical. It is not. Our defense team separates factual production from legal advocacy, validates customer-location evidence, and fixes obvious control failures before the regulator defines them for us. 

When the facts support it, we may prepare a Voluntary Self-Disclosure, because OFAC says a valid VSD may reduce the base amount of a proposed civil penalty by 50 percent. A subpoena response is not a VSD. They are different tools. In the right case, we also pursue a specific license to unblock funds or a petition for reconsideration to seek removal from an OFAC list under 31 C.F.R. § 501.807.

Working with Crypto Exchanges
We work directly with exchanges and custodial platforms facing OFAC inquiries — whether the issue is a flagged wallet address, a compliance gap identified during an exam, or a customer account connected to a sanctioned address. This includes responding to subpoenas, building blockchain-analytics-driven screening programs, and advising on whether a transaction requires a specific license before it can proceed.