The U.S. Treasury Department has argued that the lawsuit challenging its sanctions on crypto mixer Tornado Cash should be dismissed as moot following the protocol’s removal from the sanctions list on March 21. The department maintains that no final court judgment is necessary now that Tornado Cash and several related smart contracts have been delisted from the Specially Designated Nationals (SDN) list.
Treasury’s Office of Foreign Assets Control (OFAC) initially sanctioned Tornado Cash in August 2022, citing its use by North Korea’s Lazarus Group to launder stolen cryptocurrency. The decision triggered lawsuits from six Tornado Cash users, including Ethereum developer Preston Van Loon, and advocacy groups like Coin Center, who argued the sanctions were unlawful.
The Treasury’s recent filing states that “this matter is now moot,” and requested the court to consider jurisdictional mootness. However, Coinbase Chief Legal Officer Paul Grewal contends the delisting does not negate the need for a final judgment. He cited the Supreme Court’s 2024 ruling in the Yonas Fikre case, which emphasized that voluntary cessation of a contested action does not automatically moot a lawsuit unless the government proves the action won’t recur.
“Treasury has provided no assurance that it will not re-list Tornado Cash again,” Grewal said, arguing the case remains active under the voluntary cessation exception.
Legal proceedings around Tornado Cash have seen varied outcomes. A Texas federal judge initially sided with the Treasury in August 2023, affirming that Tornado Cash qualified as an entity subject to OFAC sanctions. However, on appeal, a three-judge panel ruled in November that OFAC’s sanctions on the protocol’s immutable smart contracts were unlawful. The court ordered the sanctions to be lifted by March, prompting the recent delisting.
Despite the regulatory reversal, legal troubles persist for Tornado Cash’s founders. Roman Storm and Roman Semenov were charged in August 2023 for allegedly laundering over $1 billion through the platform. Storm is out on a $2 million bond and faces trial in April, while Semenov remains on the FBI’s most wanted list. Another developer, Alexey Pertsev, was released from Dutch pretrial detention and is appealing a money laundering conviction.
The Treasury’s handling of the case—especially under changing political leadership—could influence future actions against decentralized protocols, with the crypto industry watching closely for precedents in legal accountability and regulatory scope.