US Treasury Faces Backlash From Coinbase Legal Head Regarding Attempt to Dismiss Tornado Cash Lawsuit

The U.S. Department of the Treasury reversed its stance and removed economic sanctions imposed on Tornado Cash. On 21 March 2025, the Treasury declared its investigation into the cryptocurrency mixing firm as moot. Authorities had earlier accused Tornado Cash of facilitating money laundering operations, including those associated with the notorious North Korean Lazarus Group.

In their statement, the Treasury remarked, “Following the Administration’s evaluation of the unprecedented legal and regulatory challenges posed by financial sanctions on activities within rapidly changing technological and legal frameworks, we have chosen to exercise our judgment to lift the economic sanctions against Tornado Cash.”

Nevertheless, Coinbase’s Chief Legal Officer, Paul Grewal, lambasted the Treasury’s approach to the situation, describing it as a voluntary cessation. He contended that the Treasury’s move to dismiss the ongoing lawsuit as moot is procedurally flawed. Grewal pointed out that, although the Treasury has taken Tornado Cash off the sanctions list, there’s no assurance that it won’t be reinstated.

BREAKING: People are once more able to utilize Tornado Cash!

This ban has officially been lifted from the U.S. Government’s sanctions list.

Many fail to grasp what a TRANSFORMATIVE win this is for crypto.

Make Crypto thrive again! pic.twitter.com/dwddOd9fkF

— KatieePCrypto.pls (@KatieePCrypto) November 26, 2024

Why Is Coinbase Questioning The Dismissal?

For those unfamiliar, Tornado Cash is a decentralized network based on the ETH distributed record that obscures the details of a crypto transaction’s source and destination to ensure transaction confidentiality.

This capability of the network makes it suitable for individuals seeking to conduct transactions privately. However, its features have also drawn the attention of malicious entities, presenting significant challenges for the company.

For example, in 2022, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, asserting that the protocol laundered over $7 billion since it began operations in 2019. Furthermore, the OFAC claimed that this laundered total encompassed more than $455 million tied to the Lazarus Group from North Korea.

However, the sanctions were met with immediate resistance from the crypto community. At that juncture, Coinbase supported six Tornado Cash users in launching a lawsuit to challenge the sanctions, arguing that penalizing open-source software exceeded the Treasury’s jurisdiction.

Tornado Cash experienced a victory in November 2024 when a federal appeals court ruled in their favor, determining that the Treasury had indeed overstepped its bounds.

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Treasury’s Dismissal of Tornado Cash Case Deemed ‘Voluntary Cessation’

Following the ruling from the federal appeals court, the Treasury conducted a thorough reassessment of its legal standings, leading to the delisting of Tornado Cash from its sanctions.

Even with the company’s removal from the sanctions roster, the Treasury urged caution concerning North Korean cyber operations. Treasury Secretary Scott Bessant recommended enhancing protection measures for the digital sector to guard against exploitation by state-sponsored hackers and other illicit actors.

The lifting of sanctions against Tornado Cash, however, resulted in a mixed reaction. Advocates for privacy hailed this as a significant win for open-source innovation and financial confidentiality, while detractors voiced concerns that the protocol could be misused by malicious entities now that restrictions were lifted.

#TORN Coinbase General Counsel: The U.S. Treasury has initiated another lawsuit against Tornado Cash just after OFAC delisted Tornado Cash addresses from the sanctions list, challenging the jurisdiction of the case.
The Treasury removed Tornado Cash… pic.twitter.com/J5VYLTz6sl

— Hadri Derar (@HadriDerar) March 23, 2025

According to Grewal, the Treasury has yet to tackle the fundamental issues at stake, and a definitive ruling will be essential to prevent future overreach.

Additionally, Tornado Cash’s co-founder Roman Storm is scheduled to stand trial in April. He is currently released on a $2 million bond for allegedly laundering over $1 billion in cryptocurrency via the platform.

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The article US Treasury Gets Chewed Out By Coinbase Legal Chief Over Bid To Dismiss Tornado Cash Legal Suit was first published on 99Bitcoins.