The US Department of the Treasury is facing significant backlash following its assertion that a final court ruling regarding the Tornado Cash lawsuit is moot, especially after its recent decision to remove the crypto-mixing protocol from its sanctions list. This contentious situation has raised crucial questions regarding legal practices and the implications for crypto privacy.
US Treasury Claims Tornado Cash Case Is Moot
On March 21, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the delisting of Tornado Cash from its Specially Designated Nationals (SDN) list, alongside nearly 100 Smart Contract addresses associated with the Ethereum-based mixer. This decision was made in light of a November court ruling that recognized the Treasury’s infringement on its authority by sanctioning the platform for purportedly “facilitating” money laundering activities.
In a filing made the same day, the Treasury Department argued the necessity of a final court judgment in the Tornado Cash case due to its removal from the SDN list. However, this assertion has triggered criticism, particularly from Coinbase’s Chief Legal Officer, Paul Grewal.
Coinbase’s CLO Critiques Treasury’s Position
Grewal has openly criticized the Treasury Department’s “late Friday pleading against Tornado Cash,” asserting that the claim of having mooted the case is incorrect. He emphasized the importance of a definitive court ruling, citing the legal principle of voluntary cessation. According to Grewal, for a case to be deemed moot, the defendant must demonstrate that the challenged practice is highly unlikely to recur.
To reinforce his argument, Grewal referenced FBI v. Fikre (2024), where the Supreme Court determined that removing a plaintiff from the No Fly List did not moot the case because there remained a possibility of reinstatement. This precedent underscored the necessity for a final judgment regarding Tornado Cash.
The Fight For Crypto Privacy
Back in August 2022, OFAC sanctioned Tornado Cash, alleging a failure to impose effective controls to thwart money laundering operations. The Treasury claimed that the decentralized protocol facilitated the laundering of over $7 billion worth of crypto since 2019, including substantial amounts associated with the North Korean hacking group Lazarus.
Despite the recent delisting, the battle for the future of Tornado Cash is far from over. One of its founders, Roman Storm, along with developer Alexey Pertsev, continues to face ongoing legal challenges related to money laundering accusations. Pertsev was detained in the Netherlands in August 2022 and was convicted in May 2024, while Storm is currently awaiting trial set for April 14.
As Matt Huang, co-founder of Paradigm, previously articulated, the prosecution risks imposing criminal liabilities on software developers for actions committed by third parties, potentially stifling innovation in the crypto space.
In light of these developments, the ongoing legal discourse reflects broader implications for the intersection of cryptocurrency, privacy, and regulatory oversight. As the debate continues, stakeholders within the crypto community are keenly observing how these legal proceedings will unfold and what precedent they may set for future technologies.
