Coinbase Backs Motion to Overturn Treasury’s Sanction on Tornado Cash

Crypto exchange Coinbase is supporting a new legal action filed against the US Treasury to invalidate its decision to sanction crypto mixer Tornado Cash.

The plaintiffs supported by Coinbase filed a motion on Wednesday requesting the US Office of Foreign Asset Control (OFAC) to settle the first two counts of their original complaint, which was filed in September 2022.

Notably, the counts alleged that OFAC violated the free speech clause of the U.S. Constitution’s First Amendment. Thus overstepping its legal authority under the International Emergency Economic Powers Act (IEEPA).

The plaintiffs first argued that OFAC violated a provision of the IEEPA that permits the Treasury to take action against the property in which a foreign country or foreign person has an interest. Consequently, the motion contended that the clause does not apply to open-source software since it only permits the pursuit of property-related action against a foreign national.

The plaintiffs put up a second argument that OFAC is violating the free speech clause of the First Amendment by prohibiting the open-source code.

Tornado Cash Receives Massive Support

Tornado Cash is a decentralized privacy-focused application built on the Ethereum blockchain that allows users to send and receive private transactions. However, because of the transactions’ secrecy, it has been utilized for illegal activities including money laundering, which has attracted regulators’ attention.

In August, the crypto mixer was sanctioned by the US Treasury over the laundering of about $7 billion. As part of the sanctions, all assets belonging to Tornado that were under the possession of Americans were barred.

Following the sanction, the US Treasury Department faced scrutiny from the online community. Markedly, a non-profit research and advocacy organization, Coin Center sued the Department. In its defense, Coin Center referred to the government’s move to sanction Tornado Cash as “unconstitutional”. 

Similarly, a group of crypto programmers and investors also joined forces to file complaints against the US Treasury in September regarding the Tornado Cash punishment.