Sanctions lockout — exchange custody (2022)

Indeterminate

Case description

Following the Tornado Cash sanctions in August 2022, USDC issuer Circle blacklisted wallet addresses associated with the sanctioned smart contracts. Holders of wrapped Bitcoin (WBTC) and other assets in DeFi protocols that interacted with Tornado Cash found some of their holdings blocked from conversion or withdrawal on centralized platforms. The sanctions created an indirect custody constraint: owning an asset was insufficient if its on-chain history had been associated—however tangentially—with a sanctioned protocol.

Custody context

Stress condition	Legal or authority constraint
Custody system	Exchange custody
Outcome	Indeterminate
Documentation	Unknown
Year observed	2022
Country	United States

Structural dependencies observed

Legal process requiredInstitutional cooperation required

What this illustrates

Before anyone could access the funds, a legal process had to be completed first. It's not clear whether anyone ever regained access.

Outcome interpretation

Not enough information is available to determine the outcome.

Source

Publicly Reported

Evidence type

News article

Evidence link

https://en.wikipedia.org/wiki/Bankruptcy_of_FTX

Related cases involving legal or authority constraint

39 cases involve legal or authority constraint 512 cases involve exchange custody View archive statistics →

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Framework references

Where Bitcoin Custody Intersects Legal and Fiduciary Authority

Where custody creates gaps in estate planning, fiduciary duty, and professional responsibility.

Professional Scope Boundary Matrix

What each professional or product covers, what they do not, and where gaps form between them.

The Independent Assessment Layer in Bitcoin Custody

How independent diagnostic layers emerge when multiple parties depend on shared infrastructure.