Coinbase-Backed Plaintiffs File Motion to Overturn Sanctions on Tornado Cash by US Treasury

Six individuals backed by cryptocurrency exchange Coinbase have filed a motion for a partial summary judgment in a Texas District Court, challenging the US Treasury’s decision to sanction crypto mixer Tornado Cash. The motion seeks the US Office of Foreign Asset Control (OFAC) to settle for the first two counts from its original complaint filed in September 2022. The plaintiffs claim that OFAC exceeded its statutory powers under the International Emergency Economic Powers Act (IEEPA) and violated the free speech clause of the US Constitution’s First Amendment.

According to the plaintiffs, OFAC breached a section of the IEEPA that allows the Treasury to take action against the property in which a foreign country or foreign national has an interest. The plaintiffs argue that the provision does not apply to open-source software, as it only allows the pursuit of property-related action against a foreign “national” or “person”. They contend that the smart contracts that provide the functionality to Tornado Cash should not be considered property under IEEPA, as they cannot be owned.

The plaintiffs argue that banning the open-source code violates the free speech clause of the First Amendment to the US Constitution. They suggest that banning all uses of Tornado Cash is disproportionate, as money laundering only accounted for 0.05% of crypto transactions in 2021.

The motion aims to restore internet privacy rights for US citizens and is part of a broader effort.

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