The US Treasury Department states that a conclusive court ruling is unnecessary in a legal dispute regarding its sanctioning of Tornado Cash, following the removal of the crypto mixer from the sanctions roster.
In August 2022, Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, alleging that the protocol facilitated the laundering of cryptocurrency stolen by the North Korean hacking group the Lazarus Group, prompting several Tornado Cash users to initiate legal action against the regulator.
Following a court decision favorable to Tornado Cash, the US Treasury removed the mixer from its sanctions list on March 21, as well as numerous Tornado-affiliated smart contract addresses from the Specially Designated Nationals (SDN) list, and has now contended that “this matter is presently moot.”
As Tornado Cash has been removed from the sanctions list, the US Treasury Department claims there is no requirement for a final court ruling in the lawsuit. Source: Paul Grewal
“Since this court, akin to all federal courts, has an ongoing obligation to ensure it holds Article III jurisdiction over the matter, discussions on mootness are justified,” the US Treasury stated.
Nonetheless, Coinbase’s chief legal officer Paul Grewal remarked that the Treasury’s desire to have the case deemed moot prior to an official verdict is not in line with the appropriate legal procedure.
“After reluctantly delisting TC, they now assert they have rendered any need for a final court ruling moot. But that’s not how the law operates, and they are aware of it,” he asserted.
“According to the voluntary cessation exception, a defendant’s choice to discontinue a contested practice only renders a case moot if the defendant can demonstrate that the practice cannot ‘reasonably be expected to recur.’”
Grewal referred to a 2024 Supreme Court ruling that determined a legal complaint from Yonas Fikre, a US citizen who was placed on the No Fly List, is not moot just because he was taken off the list, as the ban could be reinstated later.
Source: Paul Grewal
“In this case, the Treasury has similarly removed the Tornado Cash entities from the SDN but has offered no guarantee that it won’t re-list Tornado Cash again. That is insufficient and will make this clear to the district court,” Grewal stated.
Six Tornado Cash users led by Ethereum core developer Preston Van Loon, with Coinbase’s backing, filed a lawsuit against the Treasury in September 2022 to overturn the sanctions on the grounds that they were illegal.
The crypto advocacy organization Coin Center subsequently filed a similar lawsuit in October 2022.
In August 2023, a federal judge in Texas sided with the US Treasury, ruling that Tornado Cash constituted an entity that could be designated under OFAC regulations. Upon appeal, a three-judge panel ruled in November that the Treasury’s sanctions regarding the crypto mixer’s immutable smart contracts were unlawful.
The US Treasury had a period of 60 days to contest the ruling, which it did; however, the US court concurred with Tornado Cash, overturning the sanctions on January 21, compelling the government agency to eliminate the sanctions by March.
Related: US Treasury under Trump might adopt a different approach to Tornado Cash
Its founders are still entangled in legal issues. The US charged Roman Storm and co-founder Roman Semenov in August 2023, claiming they assisted in laundering over $1 billion in cryptocurrency through Tornado Cash.
Semenov remains at large and is listed among the FBI’s most wanted individuals. Storm is currently free on a $2 million bond and is expected to face trial in April.
In parallel, Tornado Cash developer Alexey Pertsev was released from jail after a Dutch court suspended his “pretrial detention” as he readied to appeal his money laundering conviction.
Magazine: Ripple states SEC lawsuit ‘over,’ Trump at DAS, and more: Hodler’s Digest, March 16 – 22
