The US Treasury argues that a final court ruling is unnecessary in the Tornado Cash case.
The US Treasury claims that the lawsuit against Tornado Cash is no longer valid because it removed the crypto mixer from the sanctions list on March 21.
Since Tornado Cash is no longer sanctioned, the Treasury Department insists that the court does not need to issue a final ruling on the lawsuit.
Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the protocol in August 2022, alleging that North Korea’s Lazarus Group used it to launder stolen crypto. This action led several Tornado Cash users to file a lawsuit.
After the court issued a favorable decision for Tornado Cash, the US Treasury removed it and many affiliated smart contracts from the Specially Designated Nationals (SDN) list on March 21. The Treasury then declared that the case should now be considered 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.
Coinbase’s chief legal officer, Paul Grewal, argues that the Treasury’s attempt to dismiss the case as moot before a court ruling is improper.
“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 referenced a 2024 Supreme Court decision, pointing out that Yonas Fikre’s lawsuit remained valid even after officials removed him from the No Fly List because of the possibility of reinstatement.
“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.
Ethereum developer Preston Van Loon and five other Tornado Cash users, with Coinbase’s support, filed a lawsuit against the Treasury in September 2022, claiming that the sanctions were illegal and should be repealed.
Coin Center, a crypto advocacy group, followed suit by launching a related legal case in October 2022.
The US Treasury secured a legal victory in August 2023 when a Texas federal judge ruled that Tornado Cash met the criteria for designation under OFAC rules.
In November, an appellate court with three judges ruled that the Treasury violated the law by sanctioning the crypto mixer’s immutable smart contracts.
The court overturned the Treasury’s sanctions against Tornado Cash on Jan. 21. During the 60-day appeal period, the agency contested the ruling but ultimately had to remove the sanctions by March.
Legal issues for the founders remain unresolved.
In August 2023, US authorities filed charges against Roman Storm and his co-founder, Roman Semenov, alleging they laundered over $1 billion in crypto through Tornado Cash.
Storm, who secured release on a $2 million bond, is set to stand trial in April. Meanwhile, Semenov remains a fugitive and appears on the FBI’s most wanted list.
While preparing to appeal his conviction for money laundering, Tornado Cash developer Alexey Pertsev secured release from custody after a Dutch court suspended his pretrial detention.
