Tornado Cash Users Challenge U.S. Treasury's Sanctions in Federal Court
Summary:
Users of the cryptocurrency mixer, Tornado Cash, are contesting in a federal court against a previous ruling supporting the U.S. Treasury's decision to sanction the entity. This appeal argues that the Treasury has exceeded its jurisdiction and that Tornado Cash's smart contracts do not fit the Treasury's definition of "property" subject to sanctions. The move is part of a larger legal battle dating back to September 2022, with mounting disapproval from the crypto sector. This comes alongside ongoing criminal charges involving Tornado Cash's co-founders.
Several users of Tornado Cash are contesting in a federal court, opposing a previous judgment that supported the U.S. Treasury's inclusion of the cryptocurrency mixer in its sanctioned entities list. On November 13, attorneys for Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch submitted a document in the U.S. Fifth Circuit Court of Appeals. They contest that the U.S. Treasury overstepped its jurisdiction by placing sanctions on transactions involving Tornado Cash. This dispute is in reaction to a decision made by a Texas federal judge in August, that the crypto mixer falls within the regulatory scope of the Treasury's Office of Foreign Assets Control.
The filing on November 13 stated, "The district court made an error when it decided that the Department met three of the criteria for a designation under the International Emergency Economic Powers Act and the North Korea Act. This action taken by the Department contradicts the law and goes beyond the legal authority granted by the Administrative Procedure Act.”
The plaintiffs argue that smart contracts associated with Tornado Cash, as stated in the lawsuit, are "immutable and ownerless," which doesn't match the U.S. Treasury's regulated interpretation of "property" that can be sanctioned. They also opposed the Treasury's definition of "interest," asserting that Tornado Cash lacks any "legal, equitable, or beneficial interest" in its users' smart contracts.
This appeal represents the latest legal action in a lawsuit which was initially instigated by the six individuals in September 2022. After the Office of Foreign Assets Control of the U.S. Treasury included Tornado Cash in its Specially Designated Nationals list in August 2022, there was widespread disapproval and backlash from many in the sector.
On November 13, Coinbase's chief legal officer, Paul Grewal, declared his backing to the efforts of the plaintiffs, expressing that the appellate court would pay close attention to the appeal. The crypto exchange has shown public support for Van Loon and the other plaintiffs since the lawsuit was filed in September 2022.
Coin Center, a group advocating for cryptocurrency, also lost its case against the U.S. Treasury regarding Tornado Cash in a Florida federal court. In October 2022, they also filed an appeal in the U.S. Court of Appeals in the Eleventh Circuit.
Further, U.S. authorities have also initiated criminal charges against individuals related to Tornado Cash. Co-founders Roman Storm and Roman Semenov were indicted in August on conspiracy to commit money laundering, conspiracy to violate sanctions, and conspiracy to run an unlicensed financial transfer service by the Justice Department. Storm was released on a $2-million bond and pleaded not guilty to all charges in September, while Semenov remained uncaptured at the time of reporting. Alexey Pertsev, another co-founder of Tornado Cash, was arrested in the Netherlands in August 2022 on similar charges of money laundering. He was released in April 2023 while he awaits trial.
Published At
11/14/2023 7:28:40 PM
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