The US Department of the Treasury is facing backlash over its claim that a final court ruling on the Tornado Money lawsuit is moot after delisting the crypto-mixing protocol from its sanctions list. Coinbase’s Chief Legal Officer (CLO) argued that a final ruling is required to stop further attacks on the protocol.
US Treasury Claims Tornado Money Case Is Moot
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) removed Tornado Money from its Specially Designated Nationals (SDN) list on March 21. It also delisted nearly 100 Smart Contract addresses affiliated with the Ethereum-based crypto mixer.
The Friday delisting followed a November court ruling that determined the US Treasury had exceeded its authority by sanctioning the platform for allegedly “facilitating” money laundering.
The identical day, the Treasury Department argued in a court filing that a final court judgment within the Tornado Money lawsuit is required since the crypto mixer was faraway from the SDN list.
US Treasury's Friday court filing. Source: Paul Grewal on X
Coinbase’s CLO, Paul Grewal, criticized the US treasury’s “late Friday pleading against Tornado Money,” noting that “After grudgingly delisting TC, they now claim they’ve mooted any need for a final court judgment. But that’s not the law, and so they realize it.”
Grewal argued that “under the voluntary cessation exception, a defendant’s decision to finish a challenged practice moots a case provided that the defendant can show that the practice cannot ‘reasonably be expected to recur.’”
He cited a case Supreme Court ruling from last yr, FBI v. Fikre (2024), that determined the FBI didn’t moot the case despite removing the plaintiff from the No Fly List since the ban could possibly be reinstated again in the longer term.
Based on this, the CLO considers a final court ruling on the Tornado Money lawsuit obligatory. He affirmed that the US Treasury has not assured that it won’t relist the crypto mixer in the longer term.
“That’s not adequate, and can make this clear to the district court,” Grewal concluded. Notably, the Treasury Department stated that it remained “deeply concerned in regards to the significant state-sponsored hacking and money laundering campaign” of the Democratic People’s Republic of Korea (DPRK), adding that it “will proceed to watch closely any transactions which will profit malicious cyber actors or the DPRK.”
The Fight For Crypto Privacy
In August 2022, OFAC sanctioned Tornado Money for “failing to impose effective controls” to stop malicious actors from laundering funds through the crypto mixer. The US Treasury alleged that the decentralized protocol had been used to launder over $7 billion price of crypto since 2019, including $455 million linked to the North Korea-linked hacking group Lazarus.
As Bitcoinist reported, the US District Court for the Western District of Texas reversed the OFAC sanctions against Tornado Money in January. Nevertheless, Peter Van Valkenburgh, attorney and Executive Director at CoinCenter, identified that the court ruling wasn’t “the tip of the story.”
As he explained in January, the “District Court will still need to make a decision whether the treatment is nationwide vacatur (anyone in US can use immutable contracts) or more limited relief (plaintiffs can use contracts and other parties may have to bring their very own suits). Nationwide vacatur is what we must always be rooting for.”
On Sunday, Grewal also highlighted that “Money laundering hurts people. There. So does violating the law set by Congress. And so does impugning the integrity of huge numbers of software developers with broad slanders and no individualized evidence that they did anything illegal.”
It’s price noting that despite Tornado Money’s delist from OFAC’s sanctions list, one among its founders, Roman Storm, and its developer, Alexey Pertsev, proceed their legal battle against Money Laundering charges.
Pertsev was detained within the Netherlands in August 2022 and convicted in May 2024. He’s working on his upcoming appeal after receiving a supervised release from prison. Meanwhile, Storm, also detained in 2022, awaits his April 14 trial.
As Paradigm’s co-founder, Matt Huang, previously identified, “The prosecution’s case threatens to carry software developers criminally responsible for the bad acts of third parties, which might have a chilling effect on crypto and beyond.”
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