Several crypto community members continue to fight for the "freedom" of Tornado Cash.
New legal actions supported by prominent crypto exchange Coinbase aims to reverse the sanctions imposed on cryptocurrency mixer Tornado Cash. These actions highlight the ongoing debate over cryptocurrency regulations and the privacy rights of US citizens.
Tornado Cash was sanctioned by the US Treasury Department on August 8th, 2022. At that time, the US Treasury banned a crypto mixer claiming that the platform was used for multiple money laundering schemes.
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On April 5th, six individuals filed a motion for partial summary judgment in a Texas District Court, with Coinbase backing their efforts. The six individuals involved in the filing are Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch, most of whom have previously used Tornado Cash.
The plaintiffs requested that the US Office of Foreign Asset Control (OFAC) address the first two counts of their initial complaint, which was filed in September 2022. If the motion is granted, the judge will rule on certain factual aspects, leaving the remaining issues for trial.
The plaintiffs argue that OFAC has overreached its legal boundaries under the International Emergency Economic Powers Act (IEEPA) and infringed on the free speech clause of the US Constitution's First Amendment.
According to the first claim, OFAC violated the IEEPA section allowing the Treasury to take action against property tied to a foreign country or foreign national. The plaintiffs assert that this provision, which enables property-related actions against a foreign "national" or "person," does not apply to open-source software such as Tornado Cash.
They further argue that the smart contracts that power Tornado Cash should not be considered property under the IEEPA, as they cannot be owned. In the filing, the plaintiffs noted:
An immutable smart contract is incapable of being owned; it is not property, and the Department lacks authority under IEEPA and the North Korea Act to prohibit transactions with those smart contracts.
The second claim states that OFAC's ban on the open-source code imposes a risk on free speech laws. While the plaintiffs acknowledge OFAC's authority to take action against "crypto thieves" such as North Korea's Lazarus Group, they argue that a "total prohibition is grossly disproportionate."
To ban all uses of Tornado Cash is akin to banning the printing press because a minuscule percentage of users might publish instructions on how to build a nuclear weapon.
While plaintiffs are fighting to get the Tornado Cash ban lifted, its creator deals with his own issues in the Netherlands. Following the sanctions, Tornado Cash founder, Alexey Pertsev, was arrested by Fiscal Information and Investigation Service on August 12th and has been held in custody ever since.
