U.S. Treasury Department Sees No Need for Final Judgement in Tornado Cash Sanctions Suit: Report

The U.S. Treasury Department is reportedly asking a federal judge to not make a final ruling in the Tornado Cash sanctions lawsuit, drawing criticism from Coinbase’s top attorney.

In September 2022, a group of Tornado Cash users sued the U.S. Treasury Department over the decision to add the crypto mixer to the Specifically Designated Nationals and Blocked Persons (SDN) list.

The plaintiffs claimed that the sanction of Tornado Cash infringes on their rights and threatens their ability to engage in free and private financial transactions.

Now, the Treasury Department is requesting the court to consider the matter moot, noting that the Office of Foreign Asset Control (OFAC) removed Tornado Cash from its Specially Designated Nationals (SDN) blacklist.

Paul Grewal, Coinbase’s chief legal officer, criticizes the move, warning that the crypto mixer could face future sanctions unless a ruling is actually issued.

“Power does not recede voluntarily. It’s gasps and it gasps until it no longer can. US Treasury filed yet another late Friday pleading against Tornado Cash. After grudgingly delisting TC (Tornado Cash), they now claim they’ve mooted any need for a final court judgment. But that’s not the law, and they know it…

Here, Treasury has likewise removed the Tornado Cash entities from the SDN (Specially Designated Nationals blacklist), 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.”

Tornado Cash uses cryptographic smart contracts and zero-knowledge proofs to obscure digital asset transaction trails. It has been criticized for facilitating bad actors, such as North Korea’s Lazarus Group, which uses Tornado Cash to wash stolen funds headed for nuclear development.

Grewal also cites legal examples for why he is arguing for the court to render a final decision in the case.

“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.’ Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 189, 120 (2000). Just last term, the Supreme Court unanimously held in FBI v. Fikre, 601 U.S. 234 (2024), that the FBI did not moot a case even when it removed the plaintiff from the No Fly List and produced a declaration representing that he would not be placed on the No Fly List in the future. See id. at 242.

Relying on that decision, the Fifth Circuit rejected an agency’s argument that its withdrawal of a determination ‘unilaterally and avoid judicial review’ did not moot the case, because the agency could decide to revisit the decision and issue a similar determination against the private party in the future. Lewis v. United States, 88 F.4th 1073, 1078-1079 (5th Cir. 2023).”

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