Tornado Cash's delisting included smart contract addresses and other components of the overall mixer, and followed November's ruling. The delisting may have been an effort to preempt a court ruling that would force OFAC to permanently delist Tornado Cash.
Backing up a little: A group of developers sued OFAC after Tornado Cash was first sanctioned with backing from crypto exchange Coinbase. That case, Van Loon v. Treasury, received an initial ruling from a district court judge that was favorable to the Treasury Department. On appeal, however, the Fifth Circuit ruled — somewhat narrowly — that smart contracts were outside the scope of OFAC's jurisdiction. The appeals court panel threw the case back down to the district court to sort out next steps.
On March 21, the same day it removed Tornado Cash from its sanctions list, OFAC filed a notice telling the court that the removal meant the legal case remedies cot "the matter is now moot."
Peter Van Valkenburgh, the executive director at Coin Center, said the November decision left OFAC with few options.
"They could have waited for the court to invalidate the sanctions or they could have delisted them themselves, and they delisted themselves," he said. "You can read that two ways. You can read that as 'I want to try and preserve some ability to fight in the future or [make] some other listing,' [and] that's really tough because that Fifth Circuit opinion is really bad for them."
The other read for the delisting is OFAC just wanted the matter resolved quickly, he said.
Leah Moushey, an attorney with Miller & Chevalier, said the court may choose to reject OFAC's filing because there's an open question as to whether Tornado Cash can be redesignated in the future. She pointed to a Supreme Court case with thematic similarities.
The court said in that case, FBI v. Fikre, that the U.S. government had not sufficiently proven that just removing an individual from a no-fly list meant he would never be placed back on the list.
OFAC may have to show in this case that Tornado Cash can't be designated again.
Another open question for Tornado Cash is whether the delisting has any bearing on the U.S. Department of Justice's criminal case against developer Roman Storm. After the Fifth Circuit ruling, Storm's attorneys filed a motion asking the judge overseeing the criminal case to dismiss the indictment, but the judge has already ruled that the case should move forward.
"The judge determined that the scope of the conduct went beyond the interactions with the smart contract," Moushey said. The Fifth Circuit ruling did not discuss Tornado Cash as an entity.
Van Valkenburgh noted that OFAC left its sanctions against Semenov in place, and the DOJ will continue to try and argue Storm conspired to violate sanctions.
The Storm case is currently set for trial in July. | 