The U.S. Treasury Department says there is no need for a court to issue a final ruling in the legal battle involving Tornado Cash. This statement came after the Treasury removed Tornado Cash from its sanctions list on March 21, 2024.
Tornado Cash is a crypto mixer that helps users keep their transactions anonymous. However, the Treasury sanctioned it in August 2022, claiming the platform assisted hackers from North Korea’s Lazarus Group in laundering stolen cryptocurrency.
After the Treasury imposed sanctions, several users filed a lawsuit. They argued the sanctions unfairly punished innocent users and violated U.S. laws.
In August 2023, a federal judge in Texas initially agreed with the Treasury Department, supporting its sanctions. But in November 2023, an appeals court panel overturned that decision. The appeals court ruled the Treasury could not sanction Tornado Cash’s smart contracts because they are immutable computer codes, not traditional legal entities.
Following this decision, the Treasury Department had 60 days to challenge the ruling and it did. However, in January 2024, the court again ruled in favor of Tornado Cash. The court ordered the Treasury to remove the sanctions by March 2024.
Treasury Claims Issue is Resolved
Now that Tornado Cash is off the sanctions list, the Treasury Department says the court should dismiss the lawsuit. It argues the issue is “moot,” meaning there is no longer a legal conflict to resolve.
“Because this court has a continuing obligation to ensure it has jurisdiction, briefing on mootness is warranted,” the Treasury explained in a statement.
Coinbase Lawyer Claims Treasury Could Reimpose Sanctions in the Future
Paul Grewal, chief legal officer at Coinbase, strongly disagrees with the Treasury’s position. Coinbase has supported Tornado Cash users throughout the lawsuit.
Grewal argues that removing sanctions voluntarily does not automatically end the legal case. He refers to a recent 2024 Supreme Court decision involving the U.S. government’s “No Fly List.” In that case, the Supreme Court ruled that simply removing someone from a list does not mean the issue can’t happen again.
After grudgingly delisting Tornado Cash, the Treasury claims there’s no need for a final court judgment. But that’s not the law.
Grewal stated.
He emphasized that the Treasury provided no guarantee it wouldn’t sanction Tornado Cash again in the future. Coinbase plans to continue arguing this point in court.
Tornado Cash Founders Still Face Serious Criminal Charges
Although Tornado Cash itself is no longer sanctioned, its founders still face serious legal charges.
In August 2023, the U.S. government charged founders Roman Storm and Roman Semenov. Officials accused them of laundering more than $1 billion through Tornado Cash. Storm is currently free on a $2 million bond and awaits trial in April 2024.
Semenov, meanwhile, remains at large and appears on the FBI’s most wanted list.
Another developer, Alexey Pertsev, was recently released from a Dutch prison. A Dutch court suspended his pretrial detention, allowing him to prepare an appeal against his conviction for money laundering.