Law Street Media

Crypto Org Sues Treasury Over Block on Tornado Cash Tool

Inside a data center for cryptocurrency mining with endless racks of CPU and motherboards. Processing the exchange of digital coins.

On Wednesday, Coin Center, a cryptocurrency and decentralized technologies-focused non-profit, filed suit against Janet Yellen and Andrea Gacki, the Secretary of the Treasury and Director of the Office of Foreign Assets Control (OFAC), respectively. The suit claimed that the Biden Administration’s August 2022 “criminalization” of the use of Tornado Cash, an open-source software privacy tool, is both unprecedented and unlawful.

The filing explained the events leading up to the suit, when, as previously reported, OFAC banned “virtual currency mixer” Tornado Cash for laundering the proceeds of cybercrimes. While OFAC described the tool which operates on the Ethereum blockchain, as indiscriminately facilitating anonymous transactions by blurring their origin and destination, this week’s complaint painted the technology differently.

“Tornado Cash is a tool that allows users of cryptocurrency to protect themselves from being followed in everything that they do,” the filing said. It argued that the Biden Administration’s action turned Americans who use Tornado Cash to protect their privacy into criminals, even though they themselves use the tool to protect against cybercrime.

The suit set forth several arguments in support of its request for the Northern District of Florida Court to set aside the U.S. Treasury’s order.

First, the complaint said that the defendants exceeded their statutory authority. By extension of their reasoning, they “assume[] an authority that would give them virtually unlimited control to regulate the American economy,” the filing contended. Further, the defendants had no right to ban Tornado Cash because it is not a “person” within the meaning of the applicable section of The International Emergency Economic Powers Act of 1977, rather, it is a privacy tool beyond the control of anyone, the lawsuit argued.

The complaint also asserted that the decision was arbitrary and capricious because the defendants failed to consider important aspects of the problem, changed their position without explanation, and defied their own rules. Lastly, the filing leveled a constitutional argument at the defendants, claiming that the criminalization of Tornado Cash violates the First Amendment rights of Tornado Cash users who need it to protect their private associations.

Coin Center and the plaintiffs are represented by Sasso & Sasso P.A. and Consovoy McCarthy PLLC.

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