TLDR
- U.S. Treasury removed Tornado Cash from sanctions list on March 21, 2025
- Treasury argues the legal case should be considered moot without final judgment
- Coinbase CLO Paul Grewal disputes this, citing “voluntary cessation” legal principle
- Tornado Cash was previously sanctioned in 2022 for allegedly laundering over $7.6B
- Co-founders still face legal troubles; Roman Storm awaits April trial
The U.S. Treasury Department officially removed cryptocurrency mixer Tornado Cash from its sanctions list on March 21, 2025, ending a controversial designation that began in August 2022. This action follows a November 2024 federal appeals court ruling that found the Treasury had exceeded its authority by sanctioning the platform’s immutable smart contracts.
The Treasury initially sanctioned Tornado Cash after alleging the protocol helped launder cryptocurrency stolen by North Korean hacking group Lazarus. Officials estimated the platform had been used to launder more than $7.6 billion worth of virtual assets since its creation in 2019.
The removal includes Tornado Cash and several dozen associated smart contract addresses from the Specially Designated Nationals (SDN) list. Over 100 Ethereum wallet addresses have been delisted as part of this action.
Following the delisting, the Treasury Department has argued there is no need for a final court judgment in the lawsuit brought against it. The department claims the case is now “moot” and has requested the court to dismiss the legal challenge.
“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 Treasury stated in court documents.
Criticism of This Approach
Coinbase Chief Legal Officer Paul Grewal has publicly criticized this approach. In a March 24 post on X (formerly Twitter), Grewal argued that the Treasury’s attempt to have the case declared moot without a final judgment does not follow proper legal procedure.
“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 wrote.
Grewal cited the legal principle of “voluntary cessation.” This principle holds that simply stopping a challenged practice doesn’t make a case moot unless the defendant can demonstrate the practice cannot “reasonably be expected to recur.”
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.…
— paulgrewal.eth (@iampaulgrewal) March 23, 2025
He referenced a 2024 Supreme Court ruling involving a U.S. citizen who had been placed on the No Fly List. In that case, the court found that removing the individual from the list did not make the complaint moot because the ban could potentially be reinstated later.
“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 added.
The legal battle began in September 2022 when six Tornado Cash users, led by Ethereum core developer Preston Van Loon and supported by Coinbase, sued the Treasury to reverse the sanctions. They argued the sanctions were unlawful.
Crypto policy advocacy group Coin Center filed a similar lawsuit in October 2022. A Texas federal court initially sided with the Treasury in August 2023, ruling that Tornado Cash was an entity that could be designated under OFAC regulations.
However, on appeal, a three-judge panel ruled in November 2024 that Treasury’s sanctions against the crypto mixer’s immutable smart contracts were unlawful. The court found 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.
The Treasury had a 60-day window to challenge this decision, which it did. But the U.S. court ultimately sided with Tornado Cash, overturning the sanctions on January 21, 2025, and requiring the government agency to remove the sanctions by March.
Founders Legal Problems
Despite this victory for Tornado Cash, its founders continue to face legal challenges. The U.S. charged co-founders Roman Storm and Roman Semenov in August 2023, accusing them of helping launder over $1 billion in cryptocurrency through the platform.
Semenov remains at large and is currently on the FBI’s most wanted list. Storm is free on a $2 million bond and is expected to face trial in April 2025.
Meanwhile, Tornado Cash developer Alexey Pertsev was recently released from prison after a Dutch court suspended his “pretrial detention” as he prepares to appeal his money laundering conviction. Pertsev had previously been sentenced to 5 years and 4 months in prison by a Dutch court in May.
Treasury Secretary Scott Bessent emphasized the department’s ongoing commitment to combating illicit finance in the digital asset space. “Digital assets present enormous opportunities for innovation and value creation for the American people,” Bessent stated.
“Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership and ensuring that the American people can benefit from financial innovation and inclusion,” he added.
