Key Takeaways:
Paul Grewal condemned the Treasury’s bid to dismiss the Tornado Cash lawsuit without a final ruling.
A court ruling challenged the Treasury’s authority to sanction immutable smart contracts.
The case raises concerns over financial privacy and crypto-mixing regulations.
Coinbase’s Chief Legal Officer (CLO), Paul Grewal, demands a final court judgment in the Tornado Case, despite the U.S. Department of the Treasury’s decision to delist the crypto mixer.
“After grudgingly delisting TC, they now claim they’ve mooted any need for a final court judgment. But that’s not the law, and they know it,” he stated in a March 24 post on X.
Treasury’s Reversal On Tornado Cash Ruling
The U.S. Treasury removed Tornado Cash and smart contract addresses linked to the mixer from the Specially Designated Nationals (SDN) list on March 21. This followed a November 2024 appeal court ruling, where the Department was told it had gone above its powers when it sanctioned the crypto mixer.
Treasury officials now argue that since Tornado Cash had been removed from the SDN list, the lawsuit challenging such sanctions no longer had a purpose, as the platform could not be classified as property under the International Emergency Economic Powers Act (IEEPA), a special law that allows the federal government to block and freeze assets in response to foreign threats.
Grewal warned that without a conclusive and final judgment, authorities could reimpose such sanctions on another company in the future.
He cited past legal precedents where law enforcement agencies attempted to remove sanctions and evade court judgments. Grewal warned that authorities could later reimpose similar sanctions without a conclusive ruling.
This dispute stems from the August 2022 sanctions imposed by the Office of Foreign Assets Control (OFAC), which had previously targeted Tornado Cash for allegedly enabling illicit transactions, including those linked to North Korea’s Lazarus Group.
Tornado Cash Broader Legal Battle and Community Support
Tornado Cash users have been contesting the Treasury’s sanctions in court, arguing that the platform’s immutable smart contracts should not be subject to OFAC restrictions.
Meanwhile, developers linked to the platform continue to face legal challenges.
On February 26, the Ethereum Foundation committed $1.25 million toward the legal defense of Tornado Cash developer Alexey Pertsev, emphasizing the importance of protecting financial privacy and open-source development.
Pertsev had been arrested in 2022 by Dutch authorities on money laundering charges and was sentenced to five years in prison in May 2024.
He was released earlier this month, citing the financial burden of his legal fight.
His co-founders, Roman Semenov and Roman Storm, also face legal scrutiny in the U.S., where they have been charged with conspiracy to commit money laundering.
Regulatory Wins and Unresolved Challenges
The crypto industry has seen regulatory shifts under Trump’s administration, which have benefited companies that backed his return to office.
Coinbase, a major player in the industry, donated $25 million to the Fairshake super political action committee (PAC), including $1.7 million in Bitcoin to the Trump 47 Committee.
These efforts appear to be yielding results.
In February, the U.S. Securities and Exchange Commission (SEC) dropped its two-year-long enforcement case against Coinbase, a move seen as a victory for the exchange’s lobbying efforts.
Coinbase’s CEO, Brian Armstrong, recently credited Trump’s pro-crypto stance while announcing plans to add around 1,000 employees in the U.S. this year.
However, recent criticism from Coinbase CLO Paul Grewal signals that there may still be points of contention between the crypto industry and the current administration, suggesting that regulatory battles are far from over.
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