tl;dr
The U.S. Treasury Department is seeking to avoid a final ruling in a lawsuit brought by Tornado Cash users over sanctions. The lawsuit challenges the addition of the crypto mixer to the SDN list, claiming it infringes on financial rights. The Treasury argues the matter is moot as Tornado Cash was re...
The U.S. Treasury Department is seeking to avoid a final ruling in a lawsuit brought by Tornado Cash users over sanctions. The lawsuit challenges the addition of the crypto mixer to the SDN list, claiming it infringes on financial rights. The Treasury argues the matter is moot as Tornado Cash was removed from the SDN blacklist, but Coinbase's chief legal officer criticizes the move, expressing concerns about potential future sanctions. Tornado Cash utilizes cryptographic smart contracts and zero-knowledge proofs to conceal digital asset transactions and has faced criticism for enabling bad actors. The legal officer cites precedents to support the need for a final decision in the case.
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.
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.’ 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. 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.
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