The US Treasury Department has indicated that a final court ruling is unnecessary in the lawsuit pertaining to its sanctions against Tornado Cash, now that the crypto mixer has been removed from the sanctions list.
In August 2022, the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash, claiming that the protocol facilitated the laundering of cryptocurrency stolen by the North Korean hacking group known as the Lazarus Group. This led to several Tornado Cash users filing a lawsuit against the Treasury.
Following a court decision favoring Tornado Cash, the US Treasury rescinded the mixer’s sanctions on March 21, also removing numerous Tornado-related smart contract addresses from its Specially Designated Nationals (SDN) list. The Treasury has now stated that “this matter is now moot.”
The department noted, “Since this court, like all federal courts, is obligated to confirm its Article III jurisdiction over the case, discussions regarding mootness are necessary.”
Nevertheless, the Chief Legal Officer of Coinbase, Paul Grewal, criticized the Treasury’s attempt to have the case deemed moot before an official judgment could be made, claiming that this approach is not legally sound. He pointed out, “After reluctantly removing Tornado Cash from the sanctions list, they now assert that this eliminates the need for a final court ruling. But that’s not aligned with the law, and they are aware of it.”
Grewal referenced a 2024 Supreme Court case which established that the removal of a legal complaint does not necessarily render it moot if the potential for future reinstatement exists.
He argued, “In this case, while the Treasury has removed Tornado Cash entities from the SDN, they have not provided any guarantee that they won’t re-list Tornado Cash in the future. This is insufficient and will be conveyed to the district court.”
In September 2022, six users of Tornado Cash, led by Ethereum core developer Preston Van Loon and supported by Coinbase, filed a lawsuit against the Treasury, alleging that the sanctions were illegal. Coin Center, a crypto policy advocacy organization, pursued a similar legal action in October 2022.
In August 2023, a federal judge in Texas ruled in favor of the US Treasury, asserting that Tornado Cash was subject to OFAC regulations. Nonetheless, an appellate court panel determined in November that the sanctions against the crypto mixer’s immutable smart contracts were unlawful.
The Treasury had a 60-day period to contest this decision, which it did; however, the judgment favored Tornado Cash, leading to the sanctions being lifted by January 21 and requiring the government agency to eliminate the sanctions by March.
The founders of Tornado Cash, however, remain embroiled in legal challenges. In August 2023, the US charged Roman Storm and co-founder Roman Semenov with facilitating the laundering of over $1 billion in cryptocurrency through Tornado Cash. Semenov is currently at large and is on the FBI’s wanted list, while Storm is out on a $2 million bond and is expected to stand trial in April.
Meanwhile, Alexey Pertsev, a developer for Tornado Cash, was released from prison after a Dutch court suspended his pretrial detention as he prepares to appeal his money laundering conviction.