# Proving where funds did not come from

> Proving where funds did not come from: Association sets, and the Tornado Cash aftermath. Region: Global.

Part of the Soda Labs Privacy Hub regulation map, which reads the instruments
themselves rather than summarising the summaries: https://www.sodalabs.xyz/privacy-hub/regulation

## Key facts

- Entry type: Where privacy tech meets the rulebook
- Region: Global
- Subject: Association sets, and the Tornado Cash aftermath
- Tags: privacy pools, association sets, Tornado Cash, live litigation
- Canonical page: https://www.sodalabs.xyz/privacy-hub/regulation/why-privacy-pools

## What it actually says

The 2023 Privacy Pools paper made a design argument that has held up: instead of hiding everything, let a depositor prove in zero knowledge that their withdrawal belongs to a chosen set of deposits, or does not belong to a flagged one. Honest users dissociate from illicit funds without revealing which deposit is theirs, and the policy judgement moves to an identifiable, contestable curator rather than sitting in the protocol. A mainnet implementation launched in 2025. The contrast with Tornado Cash is instructive rather than settled: the Fifth Circuit held in November 2024 that OFAC had exceeded its authority because nobody controls an immutable contract, and the sanction was lifted in March 2025. The criminal case against Roman Storm is a separate matter and remains live, so treat anything you read about it as provisional.

## The instruments that matter

- **Privacy Pools (Buterin, Illum, Nadler, Schär, Soleimani, September 2023)**: prove in zero knowledge that a withdrawal comes from a chosen association set, or not from a flagged one, without revealing which deposit is yours
- **Van Loon v. Department of the Treasury (5th Cir., November 2024)**: OFAC exceeded its authority; immutable deployed contracts are not property of a foreign national because no one controls them
- **Tornado Cash delisted March 2025**: following the ruling; the Roman Storm prosecution is separate and still live

## Sources

- [Blockchain Privacy and Regulatory Compliance (SSRN)](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4563364)
- [0xbow Privacy Pools launch coverage](https://www.theblock.co/post/348959/0xbow-privacy-pools-new-cypherpunk-tool-inspired-research-ethereum-founder-vitalik-buterin)

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