In a recent development, Paul Grewal, Chief Legal Officer at Coinbase, has criticized the U.S. Department of the Treasury’s attempt to dismiss the ongoing lawsuit concerning Tornado Cash. Grewal contends that the Treasury’s move to declare the case moot lacks legal foundation and fails to provide necessary assurances against future actions.
Background of the Tornado Cash Sanctions
In August 2022, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a decentralized cryptocurrency mixer, alleging its involvement in laundering over $7 billion, including funds linked to North Korea’s Lazarus Group. This action led to significant legal challenges from the crypto community, with Coinbase supporting six users in a lawsuit contesting the sanctions. In November 2024, a federal appeals court ruled that the Treasury had exceeded its authority, stating that Tornado Cash’s immutable smart contracts did not constitute property under federal law.
Treasury’s Motion to Dismiss and Grewal’s Response
Following the court’s decision, the Treasury removed Tornado Cash from its sanctions list on March 21, 2025, and subsequently sought to dismiss the lawsuit, arguing that the case was now moot. Paul Grewal has challenged this position, labeling it a case of “voluntary cessation,” where a defendant ceases a contested action to avoid a court ruling. Grewal emphasizes that without a final judicial determination, there is no guarantee that the Treasury won’t reimpose similar sanctions in the future.
Legal Implications and the Doctrine of Voluntary Cessation
The doctrine of voluntary cessation holds that a case is not rendered moot if the defendant’s cessation of the challenged behavior is not assured to be permanent. Grewal draws parallels to a 2024 Supreme Court case where the removal of a plaintiff from the No Fly List did not moot the case due to the absence of assurances against future relisting. He argues that the Treasury’s actions lack such assurances, leaving the door open for potential re-sanctioning of Tornado Cash or similar entities.
Ongoing Legal Proceedings and Industry Reactions
Despite the lifting of sanctions, legal proceedings continue against Tornado Cash developers. Alexey Pertsev was released from prison under electronic monitoring, while co-founder Roman Storm is out on a $2 million bond, awaiting trial. These developments underscore the complex legal landscape surrounding decentralized platforms and the broader implications for the cryptocurrency industry.
Conclusion
Paul Grewal’s critique highlights the necessity for definitive legal resolutions in the rapidly evolving cryptocurrency sector. While the Treasury’s removal of sanctions against Tornado Cash marks a pivotal moment, the absence of a conclusive court ruling leaves uncertainty regarding future regulatory actions. This case underscores the importance of clear legal frameworks to balance innovation with regulatory oversight in the digital asset space.
