Coinbase CLO Critiques U.S. Treasury’s Claim That Court Ruling on Tornado Cash Is Moot

Paul Grewal, the chief legal officer of Coinbase, has publicly addressed the U.S. Treasury’s recent move regarding Tornado Cash, a cryptocurrency mixer that was previously blacklisted due to its suspected involvement in laundering funds linked to cybercriminal activities. On March 21, the Treasury Department’s sanctions enforcement branch announced the removal of Tornado Cash from its sanctions list, lifting restrictions from over 100 ether (ETH) addresses that had been designated as Specially Designated Nationals.

Despite this apparent resolution, Grewal has voiced concerns that the Treasury’s filing implies the legal case surrounding Tornado Cash should be rendered moot. He posits that this assertion is a strategic maneuver to evade the necessity of a final court judgment that could impact the future regarding the crypto mixer.

Grewal argues that the voluntary cessation exception, which typically allows for a case to be mooted, necessitates a showing that the ceased conduct cannot be expected to recur. He highlights that the Treasury has failed to provide any guarantees that Tornado Cash would not find itself back on the sanctions list in the future.

The citation of past legal precedents underscores Grewal’s position. He references the Ninth Circuit’s reversal in the FBI v. Fikre case, where it was determined that simply removing an individual from a list does not automatically negate that individual’s legal grievances without assurances against future recurrence of similar actions.

This discourse centers around the broader implications for cryptocurrency regulation and the ongoing scrutiny over federal oversight of digital assets. Tornado Cash had been sanctioned in 2022, reportedly involved in laundering approximately $445 million tied to the Lazarus Group, a cybercrime organization believed to have connections to North Korea.

The backdrop of Grewal’s comments includes Coinbase’s role in funding litigation associated with the case, specifically the Van Loon vs. Treasury case, which sought to challenge the sanctions imposed against Tornado Cash.

In conclusion, Grewal’s critique of the Treasury highlights the complexities within the regulatory landscape of cryptocurrencies and the legal intricacies that accompany actions taken against entities like Tornado Cash. As policy discussions continue, the implications of Treasury’s latest decisions will undoubtedly influence future legal interpretations and the operational framework within the crypto space.