Coinbase CLO pushes to finalize Tornado Cash sanction removal after Treasury Department SDN update

Following the U.S. Department of Treasury’s announcement on 21 March, 2025, that it had lifted sanctions previously placed on Tornado Cash, Coinbase’s Chief Legal Office, Paul Grewal accused the Scott Bessent led department of attempting to sidestep the legal ruling. 

The accusation came is the latest episode in a lengthy legal battle and persistent advocacy led by key figures in the crypto community, like Coinbase’s Chief Legal Office, Paul Grewal.

Grewal shared a post on X accusing the Treasury Department of attempting to sidestep the legal ruling of the court. He revealed that the announcement of the lifting of the sanctions contain an illegal moot clause, which does not align with legal precedence and fails to prevent a future sanction.

The @USTreasury's response to the unambiguous mandate of the Fifth Circuit on Tornado Cash has been a study in chaos. It's time for the district court to do what was ordered months ago. Plaintiffs’ motion for partial summary judgment on Count 1 must be granted, and TC's… https://t.co/MfkR5eH1Wi

— paulgrewal.eth (@iampaulgrewal) March 24, 2025

Grewal argued that the Treasury’s voluntary withdrawal does not automatically invalidate any legal challenge, citing several cases, such as the 2024 Supreme Court ruling in the case of FBI v. Fikre, where the FBI’s removal of a plaintiff from the No Fly List did not prevent legal proceedings, as the court recognized that the agency could reinstate its prior decision at any time.

Coinbase CLO accuses U.S. Treasury of attempting legal maneuver

Grewal described the Treasury’s legal maneuvering as a “study in chaos”, arguing that the agency is yet to comply with the court’s order. He said: “It’s time for the district court to do what was ordered months ago. Plaintiffs’ motion for partial summary judgment on Count 1 must be granted, and TC’s designation must be held unlawful and set aside”

The legal battle over Tornado Cash has become a defining case for the cryptocurrency industry testing the limits of the government and regulatory authority over decentralized and open-source technology. While the Treasury’s decision to remove Tornado Cash from the SDN list was  a milestone moment, Grewal and other advocates remain concerned that the agency’s actions leave the door open for future restrictions.

Alex Pertsev, co-founder of Tornado cash, who was previously arrested in the Netherlands on money laundering charges, was released on house arrest February 2025 after serving 64 months in prison.

Co-founder Roman Semenov remains at large, while Roman Storm was arrested in August 2023 in Washington state and has been in a legal battle with the Department of Justice (DOJ) since then. He’s out on a $2-million bail and has seen overwhelming support from personalties and organizations with crypto interests.

While this reversal is welcome, it does not go far enough. @alex_pertsev remains under house arrest in Europe for his alleged role in building Tornado Cash. It is time for all charges against him to be dropped. Developers should not be held criminally liable for writing code that…

— Perianne (@PerianneDC) March 21, 2025

Tornado Cash’s legal battle with OFAC

In August 2022, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, alleging that it laundered over $7 billion including about $455 million for North Korea’s Lazarus Group. This led to its founders also being charged with money laundering and sanctions violations. Coinbase and other prominent voices in the crypto community launched a lawsuit challenging the Treasury’s actions.

In November 2024, the U.S. Court of Appeals for the Fifth Circuit ruled that the Treasury does not have the legal authority to sanction Tornado Cash, adding that the smart contracts used by the protocol to mask crypto transactions do not constitute property under federal law. The judge, Don Willett stated that “We readily recognize the real-world downsides of certain uncontrollable technology falling outside of OFAC’s sanctioning authority.”

However, the sanctions remained until March 21, 2025, when the Treasury announced that it was lifting the sanctions on Tornado Cash and removing it from the Specially Designated Nationals (SDN) list.

Treasury Secretary Scott Bessent acknowledged the evolving technological and legal landscape, stating “Digital assets present enormous opportunities for innovation and value creation for the American people.”

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