Coinbase backs a new legal effort to lift the restriction on Tornado Cash

The proposal is a component of a larger drive to give Americans their right to internet privacy back. 

The United States Treasury is dealing with a new legal action from six people supported by the cryptocurrency exchange Coinbase that seeks to invalidate the decision to penalise the cryptocurrency mixer Tornado Cash.

The Coinbase-backed plaintiffs requested that the U.S. Office of Foreign Asset Control (OFAC) settle for the first two counts from its initial complaint filed in September 2022 in a move for a partial summary judgement filed on April 5 in a Texas District Court. If approved, the judge would make decisions on some factual matters while reserving others for the trial.

The allegations alleged that OFAC had violated the First Amendment’s free expression guarantee and exceeded its legal authority under the International Emergency Economic Powers Act (IEEPA).

First, the plaintiffs alleged that OFAC had violated an IEEPA provision that permits the Treasury to take action against property in which a foreign government or foreign national has an interest.

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” or “person.”

The plaintiffs stated that the roughly 20 smart contracts that provide Tornado Cash its functionality should not be treated as property under the IEEPA because they cannot be possessed in order to bolster their claim: “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 First Amendment’s guarantee of free speech is cited as the second key defence of OFAC’s decision to prohibit the use of open-source software.

The plaintiffs argued that while OFAC has the power to prosecute “crypto thieves” like North Korea’s Lazarus Group, a comprehensive ban would be unfair given that money laundering accounted for less than 0.05% of all cryptocurrency transactions in 2021. 

“To ban all uses of Tornado Cash is akin to banning the printing press because a tiny fraction of users might publish instructions on how to build a nuclear weapon,” they added.

According to the plaintiffs, the purpose of the motion is to help Americans regain their right to online privacy. Since the individuals’ initial lawsuit against the U.S. Department of Treasury in September, this is the most current filing.

Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch are the six plaintiffs who filed the lawsuit. According to the filing, the majority of the group had dealt with Tornado Cash in the past.

Alexey Pertsev, the man behind Tornado Cash, is currently dealing with legal issues as well as personal issues in The Netherlands. On several counts of money laundering, he has been detained since August 18.

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