Coinbase-backed crypto investors sue Treasury over Tornado Cash sanctions


Coinbase says the Treasury overstepped with Tornado Cash sanctions.

Coinbase-backed crypto investors sue Treasury over Tornado Cash sanctions

A new complaint has been filed in the U.S. District Court for the Western District of Texas.

Six users of the Ethereum blockchain and cryptocurrency mixer Tornado Cash filed a lawsuit against the U.S. Department of the Treasury on Thursday, alleging that its recent addition of 44 Tornado Cash smart contract addresses to the Specially Designated Nationals (SDN) list of the Office of Foreign Asset Control (OFAC) is “illegal.”

Under the danger of criminal or civil penalties, U.S. persons and businesses are barred from dealing with the sanctioned Tornado Cash smart contract addresses on the blockchain or for business purposes as of August 8.

Plaintiffs seek annulment of the designation on the basis of three factors. First, they contend that Tornado Cash does not fulfill the definition of a property, a foreign country, or a national of one, nor a person, and hence cannot be put on the SDN list.

Second, they assert a violation of their First Amendment (free expression) rights under the United States Constitution:

“Tornado Cash allows Plaintiffs to engage in important, socially valuable speech. However, due to the designation, plaintiffs cannot use Tornado Cash to make donations to support important, and potentially controversial, political and social causes.”

A new complaint has been filed in the U.S. District Court for the Western District of Texas.

Six users of the Ethereum blockchain and cryptocurrency mixer Tornado Cash filed a lawsuit against the U.S. Department of the Treasury on Thursday, alleging that its recent addition of 44 Tornado Cash smart contract addresses to the Specially Designated Nationals (SDN) list of the Office of Foreign Asset Control (OFAC) is “illegal.”

Under the danger of criminal or civil penalties, U.S. persons and businesses are barred from dealing with the sanctioned Tornado Cash smart contract addresses on the blockchain or for business purposes as of August 8.

Plaintiffs seek annulment of the designation on the basis of three factors. First, they contend that Tornado Cash does not fulfill the definition of a property, a foreign country, or a national of one, nor a person, and hence cannot be put on the SDN list.

Second, they assert a violation of their First Amendment (free expression) rights under the United States Constitution:

“One person used Tornado Cash to donate money to Ukraine anonymously. Afterward, his wallet received potentially malicious airdrops. But because he anonymized his crypto before donating, he avoided attacks against his personal accounts. He has funds trapped in Tornado Cash.”

“Developers are worried that they could be held responsible for something they had nothing to do with and no ability to control,” said Coinbase in an argument claiming the Treasury’s move will stifle innovation.

Since its inception, the U.S. Department of the Treasury asserts that over $7 billion worth of cryptocurrencies has been laundered via Tornado Cash.

Due to the ban, stablecoin issuers such as Circle have taken measures to freeze Tornado Cash smart contract addresses that are blacklisted. Others, including Tether, have refrained from such action pending law enforcement instruction.