Treasury Drops Tornado Cash Sanctions, Legal Battle Continues

The U.S. Treasury Department has asserted that no further court ruling is necessary in the ongoing legal dispute over its sanctioning of the cryptocurrency mixer Tornado Cash. This assertion comes after the Treasury recently removed Tornado Cash and associated addresses from its sanctions list. The platform was initially blacklisted in August 2022 by the Treasury’s Office of Foreign Assets Control (OFAC), which alleged that the protocol was used by North Korea’s Lazarus Group to launder stolen cryptocurrency. This move sparked significant backlash, leading six Tornado Cash users, including Ethereum developer Preston Van Loon and supported by Coinbase, to file a lawsuit against the department, claiming that the sanctions were unlawful.

On March 21, the Treasury officially delisted Tornado Cash and several of its smart contract addresses from the Specially Designated Nationals (SDN) list. In a court filing, the department stated that the matter is now moot, asserting that a final judgment is unnecessary since the issue has been resolved. However, Coinbase’s Chief Legal Officer, Paul Grewal, contested this view. Grewal argued that simply removing Tornado Cash from the list does not legally end the case. He cited the “voluntary cessation” doctrine, which holds that a case is not moot if the defendant could potentially return to the same conduct. Grewal referred to a 2024 Supreme Court decision in the case of Yonas Fikre, where a removal from the No Fly List did not invalidate a legal complaint due to the possibility of reinstatement. Grewal stated, “Here, Treasury has likewise removed the Tornado Cash entities from the SDN, but has provided no assurance that it will not re-list Tornado Cash again,” vowing to raise this with the district court.

The legal saga surrounding Tornado Cash has seen mixed rulings. A Texas judge initially sided with the Treasury in 2023, but a later appeals court found that sanctioning the mixer’s immutable smart contracts was unlawful. This led to the sanctions being formally overturned in January 2025. Despite the lifting of sanctions, legal troubles persist for the platform’s founders. Roman Storm, charged with laundering over $1 billion, awaits trial in April. Co-founder Roman Semenov remains at large, and developer Alexey Pertsev has been released in the Netherlands while appealing his conviction.

In a related development, a developer has ported Tornado Cash to the MegaETH blockchain’s public testnet, enabling private transactions on the high-performance network. MegaETH, which recently launched, boasts a throughput capacity of up to 20,000 transactions per second. The developer, known pseudonymously as Gunboats, said the idea was sparked by the U.S. Treasury’s recent removal of Tornado Cash addresses from the OFAC sanctions list, following a court ruling earlier this year. This move highlights the ongoing interest and innovation in the cryptocurrency space, despite the regulatory challenges faced by platforms like Tornado Cash.