The US Treasury Department says there is no need for a final court judgment in a lawsuit over its sanctioning of Tornado Cash after dropping the crypto mixer from the sanctions list.
In August 2022, Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash after alleging the protocol helped launder crypto stolen by North Korean hacking crew the Lazarus Group, leading to a number of Tornado Cash users filing a lawsuit against the regulator.
After a court ruling in favor of Tornado Cash, the US Treasury dropped the mixer from its sanctions list on March 21, along with several dozen Tornado-affiliated smart contract addresses from the Specially Designated Nationals (SDN) list, and has now argued “this matter is now moot.”
“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,” the US Treasury said.
However, Coinbase chief legal officer Paul Grewal said the Treasury’s hope to have the case declared moot before an official judgment can be made isn’t the correct legal process.
“After grudgingly delisting TC, they now claim they’ve mooted any need for a final court judgment. But that’s not the law, and they know it,” he said.
“Under the voluntary cessation exception, a defendant’s decision to end a challenged practice moots a case only if the defendant can show that the practice cannot ‘reasonably be expected to recur.’”
Grewal pointed to a 2024 Supreme Court ruling that found a legal complaint from Yonas Fikre, a US citizen who was put on the No Fly List, is not moot by taking him off the list because the ban could be reinstated again at a later date.
“Here, Treasury has likewise removed the Tornado Cash entities from the SDN, but has provided no assurance that it will not re-list Tornado Cash again. That’s not good enough, and will make this clear to the district court,” Grewal said.
Six Tornado Cash users led by Ethereum core developer Preston Van Loon, with the support of Coinbase, sued the Treasury in September 2022 to reverse the sanctions under the argument that they were unlawful.
Crypto policy advocacy group Coin Center followed through with a similar suit in October 2022.
In August 2023, a Texas federal court judge sided with the US Treasury, ruling that Tornado Cash was an entity that may be designated per OFAC regulations. On appeal, a three-judge panel ruled in November that Treasury’s sanctions against the crypto mixer’s immutable smart contracts were unlawful.
US Treasury had a 60-day window to challenge the decision, which it did; however, the US court sided with Tornado Cash, overturning the sanctions on Jan. 21 and forcing the government agency to remove the sanctions by March.
Related: US Treasury under Trump could take a different approach to Tornado Cash
Its founders are still facing legal strife, however. The US charged Roman Storm and fellow co-founder Roman Semenov in August 2023, accusing them of helping launder over $1 billion in crypto through Tornado Cash.
Semenov is still at large and on the FBI’s most wanted list. Storm is free on a $2 million bond and expected to face trial in April.
Meanwhile, Tornado Cash developer Alexey Pertsev was released from prison after a Dutch court suspended his “pretrial detention” as he prepared to appeal his money laundering conviction.
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