US Treasury Claims Final Court Judgment Unnecessary in Tornado Cash Case

The US Treasury Department has argued that a final court judgment is unnecessary in the lawsuit concerning its previous sanctions against crypto mixer Tornado Cash, following the removal of the platform from its sanctions list.

Background of the Case

In August 2022, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, alleging it facilitated money laundering activities linked to North Korea’s Lazarus Group. This action prompted several Tornado Cash users, supported by Coinbase, to file a lawsuit challenging the legality of the sanctions.

Recent Developments

After a series of court decisions, including a November 2023 appellate ruling that declared sanctions against Tornado Cash’s immutable smart contracts unlawful, the Treasury removed Tornado Cash and associated smart contract addresses from its Specially Designated Nationals (SDN) list on March 21, 2024.

Following this removal, the Treasury now argues that the lawsuit is moot, stating:

“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.”

Coinbase’s Response

Coinbase Chief Legal Officer Paul Grewal criticized the Treasury’s stance, asserting that simply removing Tornado Cash from the sanctions list does not legally moot the case. Grewal cited the “voluntary cessation exception,” which requires the defendant to demonstrate that the challenged practice cannot reasonably recur.

Grewal referenced a 2024 Supreme Court ruling involving Yonas Fikre, a US citizen removed from the No Fly List, where the court ruled that removing someone from a list does not automatically moot a legal challenge, as the action could be reinstated later.

Key Points

• US Treasury sanctioned Tornado Cash in August 2022, alleging money laundering ties.
• After legal challenges, sanctions were overturned by a court ruling in January 2024.
• Treasury removed Tornado Cash from sanctions list in March 2024, claiming the lawsuit is now moot.
• Coinbase argues the case remains relevant due to potential future reinstatement of sanctions.
• Tornado Cash founders still face separate criminal charges related to money laundering.

Ongoing Legal Issues for Tornado Cash Founders

Despite the removal of sanctions, Tornado Cash co-founders Roman Storm and Roman Semenov continue to face criminal charges in the US for allegedly laundering over $1 billion in cryptocurrency. Semenov remains at large and is listed among the FBI’s most wanted, while Storm awaits trial scheduled for April 2024.

Additionally, Tornado Cash developer Alexey Pertsev was recently released from prison in the Netherlands pending an appeal against his money laundering conviction.