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Coinbase’s chief legal officer, Paul Grewal, has publicly criticized the U.S. Treasury for attempting to dismiss the Tornado Cash lawsuit by claiming the case is now moot. This legal battle stems from the Treasury’s prior sanctions against Tornado Cash, a cryptocurrency mixer accused of facilitating illicit financial activities.

Background on Tornado Cash Sanctions

On March 21, the U.S. Department of the Treasury officially removed Tornado Cash and several associated smart contract addresses from its sanctions list. This reversal comes after the controversial sanctions were imposed in August 2022 by the Office of Foreign Assets Control (OFAC). Regulators had accused Tornado Cash of enabling money laundering schemes, including those tied to North Korea’s Lazarus Group.

The removal followed a significant ruling in November 2024 by a federal appeals court. The court determined that the Treasury had exceeded its authority by sanctioning Tornado Cash’s immutable smart contracts, which operate autonomously and cannot be altered once deployed.

Is the Case Moot? Treasury’s Stance

After the March 21 delisting, the U.S. Treasury argued that the lawsuit should now be considered resolved. In a statement, the department claimed that the removal of Tornado Cash from the Specially Designated Nationals (SDN) list rendered the case “moot.”

The Treasury further requested that the court evaluate its jurisdiction over the matter, emphasizing its obligation to ensure compliance with Article III jurisdiction. It stated that “briefing on mootness is warranted” to determine whether the case should proceed.

Paul Grewal’s Response

Paul Grewal strongly disagreed with this approach, arguing that the Treasury’s position is inconsistent with legal principles. In a statement shared on March 24, he highlighted the issue of voluntary cessation, a legal doctrine where a defendant ceases a disputed action to avoid a court ruling.

“Power does not recede voluntarily. It gasps and it gasps until it no longer can […] 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.”

According to Grewal, the Treasury has not provided sufficient assurance that sanctions against Tornado Cash will not be reimposed in the future. He referenced a 2024 Supreme Court case involving an individual removed from the No Fly List, where the court ruled that the case was not moot because the government failed to guarantee the person would not be added back to the list.

Lack of Assurance from the Treasury

While Tornado Cash has been delisted, Grewal emphasized that the Treasury has offered no guarantees that it will not sanction the platform again. He described this uncertainty as unacceptable and indicated plans to present this argument to the district court.

Legal Challenges for Tornado Cash Developers

The ongoing legal disputes surrounding Tornado Cash extend beyond the sanctions. In February, Tornado Cash developer Alexey Pertsev was released from prison under electronic monitoring after a Dutch court suspended his pretrial detention. This decision allows Pertsev to focus on appealing his conviction.

Meanwhile, Tornado Cash co-founder Roman Storm is currently out on a $2 million bond and is expected to stand trial in April. Both Storm and fellow co-founder Roman Semenov were charged by U.S. authorities in August 2023 for allegedly facilitating the laundering of over $1 billion in cryptocurrency through Tornado Cash.

Key Takeaways

  • The U.S. Treasury has removed Tornado Cash from its sanctions list, but Coinbase’s legal officer Paul Grewal argues that the case is far from resolved.
  • Grewal accuses the Treasury of attempting to avoid a court judgment by claiming the lawsuit is moot, a strategy known as voluntary cessation.
  • Legal battles continue for Tornado Cash developers, with trials and appeals underway.

This case underscores the ongoing clash between regulators and decentralized platforms in the cryptocurrency space. As the legal proceedings unfold, they will likely serve as a precedent for how similar cases are handled in the future.

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