TLDR
- U.S. Treasury removed Tornado Cash from its sanctions list on March 21, 2025
- Decision follows November 2024 federal appeals court ruling that Treasury overstepped its authority
- Coinbase CLO Paul Grewal argues case isn’t moot as Treasury provided “no assurance” against future sanctions
- Tornado Cash was previously accused of laundering over $7.6 billion in virtual assets
- Co-founders face legal troubles, with Roman Storm awaiting trial in April 2025
The Court Battle
The U.S. Treasury Department has officially removed cryptocurrency mixer Tornado Cash and over 100 associated Ethereum wallet addresses from its sanctions list. The decision, announced on March 21, 2025, follows a November 2024 ruling by a federal appeals court that found the Treasury had exceeded its authority.
The sanctions were first imposed in August 2022 by the Office of Foreign Assets Control (OFAC). At that time, regulators accused the platform of facilitating money laundering activities, including transactions linked to North Korea’s Lazarus Group.
The Fifth Circuit Court issued a decision in November 2024 that reversed the sanctions. The court determined that OFAC “overstepped its congressionally defined authority” when it sanctioned the cryptocurrency mixer.
The court’s decision hinged on the nature of Tornado Cash’s technology. The ruling stated that OFAC’s ability to sanction entities does not extend to Tornado Cash because its immutable smart contracts cannot be considered “property” under the International Emergency Economic Powers Act.
According to court documents, “With respect to immutable smart contracts, the court reasoned, there is no person in control and therefore ‘no party with which to contract.'” This technical distinction proved crucial in the legal battle.
Following the delisting, the Treasury Department argued the lawsuit should now be considered resolved. They stated that because Tornado Cash had been removed from the Specially Designated Nationals list, the case was effectively “moot.”
The Treasury asserted that the court should assess whether it still has jurisdiction. They noted that federal courts have a “continuing obligation to satisfy itself” on matters of Article III jurisdiction, and for that reason, “briefing on mootness is warranted.”
Coinbase’s Response
Coinbase’s chief legal officer, Paul Grewal, strongly disagrees with the Treasury’s position. In a March 24 post on X (formerly Twitter), he criticized the department’s approach.
“Power does not recede voluntarily. It gasps and it gasps until it no longer can,” Grewal wrote. “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.”
Grewal argues this is a classic example of “voluntary cessation.” This legal principle occurs when a defendant ends a contested action to avoid a court ruling.
For voluntary cessation to apply, there must be clear assurance the behavior will not happen again. Grewal points out that the Treasury has provided no such guarantee.
He referenced a 2024 Supreme Court decision involving a U.S. citizen removed from the No Fly List. In that case, the court found the matter was not moot because the government failed to offer assurance that the individual wouldn’t be placed back on the list.
While Tornado Cash has been removed from the sanctions list, Grewal noted the Treasury has given “no assurance” it won’t be added again. “That’s not good enough, and will make this clear to the district court,” he added.
Despite lifting the sanctions, the Treasury Department maintains its commitment to combating illicit activities. They stated they remain dedicated to using their powers to disrupt malicious actors from exploiting digital assets.
Secretary of the Treasury Scott Bessent commented on the situation. “Digital assets present enormous opportunities for innovation and value creation for the American people,” he said.
Bessent added, “Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership. It ensures that the American people can benefit from financial innovation and inclusion.”
Tornado Cash Founders’ Legal Troubles
The Tornado Cash platform has been linked to substantial money laundering activities. At the time of the initial sanctions, the Treasury estimated it had been used to launder more than $7.6 billion worth of virtual assets since its creation in 2019.
The platform’s founders continue to face legal challenges. In May 2024, a Dutch court sentenced co-founder Alexey Pertsev to 5 years and 4 months in prison.
More recently, Pertsev was released from prison under electronic monitoring. A Dutch court suspended his pretrial detention, allowing him to focus on appealing his conviction.
Meanwhile, co-founder Roman Storm is currently free on a $2 million bond. He is expected to face trial in April 2025.
Storm and fellow co-founder Roman Semenov were charged by U.S. authorities in August 2023. They are accused of helping launder over $1 billion in cryptocurrency through the platform.
The Treasury’s decision to lift sanctions represents a major shift in the cryptocurrency regulatory landscape. However, the legal battle appears far from over as Coinbase and others continue to push for clarity on the limits of regulatory authority.
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