Treasury's Request to Avoid Final Ruling on Tornado Cash Sanctions Sparks Coinbase Criticism
1min read The U.S. Treasury Department has reportedly requested a federal judge to refrain from issuing a final ruling in the lawsuit involving the sanctions against Tornado Cash. This move has sparked criticism from Coinbase’s chief legal officer, Paul Grewal, who argues that the absence of a final judgment could leave the door open for future sanctions against the crypto mixer.
Ask Aime: Will Tornado Cash sanctions continue without a final ruling?
In September 2022, a group of Tornado Cash users initiated legal action against the U.S. Treasury Department. The lawsuit challenged the decision to include Tornado Cash on the Specially Designated Nationals and Blocked Persons (SDN) list, asserting that the sanction infringes on users' rights and impedes their ability to conduct private financial transactions.
The Treasury Department has since removed Tornado Cash from the SDN blacklist, but it has not provided assurances that the crypto mixer will not be re-listed in the future. Grewal contends that this lack of assurance is insufficient and that a final court judgment is necessary to prevent potential future sanctions.
Tornado Cash, which uses cryptographic smart contracts and zero-knowledge proofs to obscure digital asset transaction trails, has been criticized for facilitating illicit activities. Notably, North Korea’s Lazarus Group has been known to use Tornado Cash to launder stolen funds intended for nuclear development.
Grewal has cited legal precedents to support his argument for a final decision in the case. He references the voluntary cessation exception, which states that a defendant’s decision to end a challenged practice only moots a case if the practice cannot reasonably be expected to recur. Grewal also points to recent Supreme Court decisions, such as FBI v. Fikre, which held that the FBI did not moot a case even after removing a plaintiff from the No Fly List and providing assurances that the plaintiff would not be re-listed.
Grewal’s argument is further bolstered by a Fifth Circuit ruling in Lewis v. United States, which rejected an agency’s claim that its withdrawal of a determination unilaterally avoided judicial review. The court ruled that the agency could decide to revisit the decision and issue a similar determination against the private party in the future.
In summary, the U.S. Treasury Department's request to avoid a final judgment in the Tornado Cash sanctions lawsuit has been met with resistance from Coinbase’s legal team. The absence of a final ruling could potentially leave Tornado Cash vulnerable to future sanctions, and legal precedents support the need for a definitive court decision to prevent such outcomes. The controversy surrounding Tornado Cash highlights the complex interplay between regulatory oversight and the rights of cryptocurrency users, as well as the potential for future legal battles in this evolving landscape. 
