Coinbase's General Counsel Criticizes U.S. Treasury's Attempt to Dismiss Tornado Cash Lawsuit

Paul Grewal, the chief legal officer of Coinbase, has denounced the U.S. Treasury for attempting to dismiss the Tornado Cash lawsuit by asserting that the case is now pointless.

On March 21, the U.S. Department of the Treasury officially removed Tornado Cash and several associated smart contract addresses from its sanctions list, rescinding the August 2022 sanctions imposed by the Office of Foreign Assets Control.

The platform had been accused of facilitating money laundering activities, including transactions linked to North Korea’s Lazarus Group.

The move was prompted by a November 2024 ruling by a federal appeals court, which found that the Treasury had exceeded its authority in sanctioning the crypto mixer's immutable smart contracts.

Following the March 21 ruling, the Treasury Department stated in a declaration that the case should now be considered resolved, contending that since Tornado Cash and the related smart contracts had been removed from the specially Designated Nationals list, the lawsuit was effectively “moot.”

The US Treasury asserted that the court should determine whether it still has jurisdiction over the case, noting that, like all federal courts, it has a “continuing obligation to satisfy itself” on matters of Article III jurisdiction, and for that reason, “briefing on mootness is warranted.”

However, Grewal argued in a Mar. 24 X post that this approach does not align with the law.

“Power does not recede voluntarily. It gasps and it gasps until it no longer can […] After reluctantly 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.”

According to Grewal, this is a classic example of what’s known as voluntary cessation, a legal principle where a defendant ends a contested action in an attempt to avoid a court ruling.

However, this only applies if there is clear assurance that the behavior will not recur. In Grewal’s view, the Treasury has provided no such guarantee.

He cited a 2024 Supreme Court decision involving a U.S. citizen who had been removed from the No Fly List. The court found that the case was not moot, as the government had failed to offer any assurance that the individual would not be placed back on the list.

While Tornado Cash may have been removed from the sanctions list, Grewal noted that the Treasury has given “no assurance” it won’t be added again.

“That’s not good enough, and will make this clear to the district court,” he added.

Recent developments come a month after Tornado Cash developer Alexey Pertsev was released from prison under electronic monitoring after a Dutch court suspended his pretrial detention, allowing him to focus on appealing his conviction.

Meanwhile, Tornado Cash co-founder Roman Storm is currently out on a $2 million bond and is expected to face trial in April. He was charged by U.S. authorities in August 2023, along with fellow co-founder Roman Semenov, for allegedly helping launder over $1 billion in cryptocurrency through the platform.