Six cryptocurrency users sued the US Treasury for being blacklisted by Tornado Cash last month, alleging that the department’s sanctions watchdog overstepped its authority to ban all cryptocurrency users. American people From interacting with the privacy tool.
According to the lawsuit filed in the U.S. District Court for the Western District of Texas, the Treasury’s Office of Foreign Assets Control (OFAC) did not have the legal right to designate Tornado Cash, which the lawsuit refers to as a “decentralized, open-source software project that restores some privacy.” For Ethereum users, “as a sanctioned entity because it is not an entity, person or organization.
Office of Foreign Assets Control Tornado Cash wallet addresses added, including smart wallet addresses, to the Specially Designated Citizens List (SDN) last month, saying the privacy shuffler was a key tool for North Korean hackers, who used it to launder stolen cryptocurrency from projects like Axie Infinity. The list of sexually granted persons consists of blacklisted individuals or companies that are owned or operated on behalf of OFAC target countries.
The plaintiffs are Coinbase employees Tyler Almeida and Nate Welch, co-founder of Prysmatic Labs, Preston van Loon, GridPlus engineer Kevin Vitale, Ethereum supporter and angel investor Alexander Fischer and former Amazon engineer Joseph Van Loon (whose current employer has not been disclosed). Cryptocurrency exchange Coinbase is funding this effort.
Each of the plaintiffs had some Ether (ETH) locked in Tornado Cash, which they used for various legal purposes — including making a donation to Ukraine and protecting their private wallets from being traceable to their public online identities — but they can no longer access it due to OFAC sanctions. Foreign (OFAC) allege the lawsuit.
Besides the Treasury, prosecutors are suing Treasury Secretary Janet Yellen and Director of the Office of Foreign Assets Control Andrea Jackie.
Prosecutors claim that OFAC violated Administrative Procedures Lawwhich dictates how federal agencies develop and issue regulations, because Tornado Cash is neither property nor a foreign national/state, and thus the sanctions watchdog has overstepped its authority.
The lawsuit also alleges a violation of the plaintiffs’ First Amendment rights to “engage in important and socially valuable discourse.”
Preston van Loon, Almeida and Welch also allege infringement of their Fifth Amendment rights, which protect against self-incrimination, because they did not receive notice or other form of prior action prior to the ETH freeze.
As a result, the plaintiffs are calling on the court to “declare[e] That naming the defendants is null and void and has no effect; announce[e] that the appointment of the defendants is inconsistent with the law; … fakats[e] Appointment permanently orders defendants, their officers, employees and agents to impose, enforce, apply or take any action of any kind under or rely upon the appointment and litigation costs.”
OFAC’s appointment of Tornado Cash and its smart wallet addresses have been controversial since it was announced last month.
The Coin Center Crypto Research said in a blog post that this was the first time a program, rather than an individual or entity, had been added to the SDN list, a jumping-off point for claimants.
“Historically, defendants have used their delegated authority to designate individuals, companies, and other entities to the Specially Designated Persons list. For example, on February 25, 2022, OFAC added Vladimir Putin to the list of banned sites,” the defendants also designated. Blender.ioa virtual coin mixing tool … unlike Tornado Cash, Blender.io It operates under central control. Also unlike Tornado Cash, users of Blender.io You don’t hold certain crypto assets at all times, instead you get randomly “mixed” crypto assets. “
Paul Grewal, Coinbase’s chief legal officer, told CoinDesk that while the exchange “fully respects the Treasury and OFAC… the recent appointments of Tornado Cash smart contracts have given us a serious pause.”