Coinbase Backs Lawsuit Against US Treasury Department Over Tornado Cash Sanctions

Coinbase, the largest US-based cryptocurrency exchange, is helping to organize and pay the costs of a lawsuit against the US Treasury Department over the sanctions against Tornado Cash.

Six people, including two Coinbase employees, filed the lawsuit on Thursday, which alleges that the Treasury Department overstepped its authority to prevent all US citizens from interacting with the privacy tool.

The six plaintiffs are Coinbase employees Tyler Almeida and Nate Welch, former Amazon engineer Joseph Van Loon, Ethereum proponent and angel investor Alex Fisher, GridPlus engineer Kevin Vitale and Prysmatic Labs co-founder Preston Van Loon.

Coinbase, the cryptocurrency mixer that works on the Ethereum blockchainis supporting the effort and funding the costs (legal fees) associated with the lawsuit against the Treasury Department over its decision to sanction a program that allowed users to hide their transaction history, increasing privacy on what is otherwise an open and transparent blockchain.

All six plaintiffs stated that they previously used Tornado Cash for legitimate purposes and have been financially harmed by the sanctions.

“None of the plaintiffs are terrorists or criminals. None supports terrorism or illegal activity. None is a money launderer. Each is an American who simply wishes to engage in perfectly legal activity in private,” attorneys for Tornado Cash users said in the complaint. filed in the US District Court for the Western District of Texas.

The lawsuit alleges that Treasury overstepped its authority by sanctioning software, rather than a person or entity. It then alleges that the Department violated the plaintiffs’ First Amendment rights by prohibiting them from using a tool that enabled them to exercise free speech.

The lawsuit alleges that the Treasury Department’s Office of Foreign Assets Control (OFAC) did not have the legal right to sanction Tornado Cash, which the lawsuit refers to as “a decentralized open source software project that restores some privacy to Ethereum users,” because it (the software) is not an entity, person or organization.

All of the plaintiffs have some Ether (ETH) locked up in Tornado Cash which they used for various legal purposes – including making donations to Ukraine and protecting their private wallets from being traced to their public online identities. They said they now can’t access their money because of OFAC’s sanctions, the lawsuit says.

Besides the Treasury, the plaintiffs are Treasury Secretary Janet Yellen and OFAC Director Andrea Gacki.

In an interview, Coinbase general counsel Paul Grewal said the firm has a “unique responsibility to support that cause given our role in the crypto ecosystem.”

Grewal further added: “The Treasury Department has other means at its disposal to target bad actors who are using the program to cover their digital tracks. We have a ton of respect for the Treasury Department’s role here, but they must also act according to the law.”

Early last month, as reported by Blockchain.News, Treasury’s OFAC accused Tornado Cash of laundering over $7 billion of cryptocurrencies since its creation in 2019.

The watchdog sanctioned crypto wallets linked to the cryptomixer and related code known as smart contracts.

According to the regulator, Tornado Cash had become a preferred tool for North Korean hackers and other illegal actors to launder billions of dollars worth of digital tokens.

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