Yes, there are relays to connect the clients together and then the transfer is direct.

Several years ago when I was doing consulting I had lots of clients that blocked all the normal file sharing domains to prevent people from getting files into servers but magic wormhole always worked for me. I’d stash a wormhole-william (magic wormhole compatible Go application) executable in our installer deliverable and then I could update the software without IT’s help in the future (I often had RDP access). The headaches saved by cutting red tape were worth the risk for me.