Treasury Says No Final Ruling Needed

The US Treasury Department says it doesn’t need a final court ruling in its lawsuit over the Tornado Cash sanctions since the crypto mixer is no longer on the sanctions list.

Several Tornado Cash users sued the Treasury’s OFAC in August 2022 after it alleged the protocol helped launder crypto stolen by the Lazarus Group.

Following a court decision in favor of Tornado Cash, the US Treasury removed the mixer from its sanctions list on March 21 along with several dozen smart contract addresses from the Specially Designated Nationals (SDN) list and has subsequently argued, “This matter is now moot.”

Treasury said, “Because this court, like all federal courts, has a continuing obligation to satisfy itself that it possesses Article III jurisdiction over the case, briefing on mootness is warranted.”

Court Disagrees, But Treasury Still Wants a Shortcut

Paul Grewal, the chief legal officer of Coinbase, said that the Treasury’s plan to have the case thrown out before a final decision can be made is not the right way to obey the law.

They say they don’t need a final court ruling anymore after reluctantly taking TC off the list. “But that is against the law, and they know it,” he said.

Under the voluntary cessation exception, a defendant’s decision to stop a contested practice moots a case only if the defendant can show that the practice cannot “reasonably be expected to recur.”

Grewal cited a 2024 Supreme Court decision that said removing Yonas Fikre from the No Fly List would not answer his legal complaint because the ban could be put back in place at a later date.

“Here, too, Treasury has taken the Tornado Cash entities off of the SDN, but it hasn’t said for sure that it won’t list Tornado Cash again.” There’s more than one problem with that, and Grewal will make that clear to the district court.

Ethereum’s core developer, Preston Van Loon, led six Tornado Cash users, who were also supported by Coinbase, and filed a case against the Treasury in September 2022, saying that the sanctions were illegal.

Later, crypto policy supporter group Coin Center, which shared the same view, filed a separate case in October 2022.

According to OFAC rules, Tornado Cash was an entity that could be designated in August 2023, and a federal court judge in Texas agreed with the US Treasury. In November, a three-judge panel considered the appeal and found that Treasury’s actions against the crypto mixer’s unchangeable smart contracts were illegal.

Tornado’s Founders Still Caught in Trouble, Even as Sanctions Drop

The US Treasury appealed the ruling within the 60-day window, but the court still sided with Tornado Cash. The court again sided with Tornado Cash and overturned the sanctions on January 21, telling the government agency to remove them by March.

Its founders are still facing legal trouble. In August 2023, the US charged Roman Storm and his co-founder, Roman Semenov, with using Tornado Cash to assist with over $1 billion in crypto laundering.

The FBI still has Semenov on its most wanted list. Storm is released with the $2 million bond, and his trial is set for April.

Meanwhile, Alexey Pertsev got ready to appeal his money laundering conviction; a Dutch court suspended his “pretrial detention,” thus releasing him from prison.