Coinbase employees and Ethereum Devs sue U.S. Treasury over Tornado Cash sanctions

The U.S. Treasury Department, Treasury Secretary Janet Yellen, and other officials were sued on Thursday by six users of Tornado Cash, a well-known decentralized cryptocurrency service, over their August decision to impose sanctions on the site.

For years to come, the crypto sector will undoubtedly be affected by the case’s conclusion, which hinges on the unusual legal question of whether the US government may impose penalties on publicly available software code.

The users contend in a 20-page complaint that the government’s decision to punish Tornado Cash exceeded its power and infringed their rights to free speech and property under American law.

The report also claimed that the sanction is a violation of the freedom and privacy of financial transactions for law-abiding Americans.

Ethereum Developer Among The Plaintiffs

Among the plaintiffs are several prominent figures in the Ethereum community, including Preston Van Loon, Prysmatic Labs Co-founder and Ethereum Protocol Developer.

Preston and his brother, Joseph Van Loon intended to use Tornado Cash’s service in order to privately fund an Ethereum node and staking service, however, after the sanctions the two brothers were not able to do so.

“Today I joined five other plaintiffs in challenging the U.S. Treasury’s and OFAC’s sanctions against TornadoCash, a piece of software running on Ethereum.” Preston Van Loon wrote on his Twitter. “I did not take this decision lightly. Code is speech and free speech is a constitutional right worth protecting.”

Coinbase Objects the Sanctions

The cryptocurrency exchange was not happy with the U.S. sanctions on Tornado Cash.

Coinbase’s CEO, Brian Armstrong was vocal about his discontent with the US Treasury Department’s decision. Armstrong is also the one paying the legal bills for most of the plaintiffs, including Coinbase employee, Tyler Almeida a security analyst for Coinbase in California.

Almeida claims that he utilized Tornado Cash to make anonymous contributions to assist Ukraine. Almeida contends that the United States’ penalties against the service violate his First Amendment right to free speech and, consequently, his ability to give.

Why did the Treasury Department Impose Sanctions on Tornado Cash?

Tornado Cash Tornado, a decentralized non-custodial privacy solution built on the Ethereum blockchain, was accused of laundering”more than $7 billion worth of virtual currency since its creation in 2019″ by the United States Treasury Department.

Among the several laundering accusations, the U.S. government accused Tornado Cash of allowing its platform to be used to launder over “$96 million malicious cyber actors’ funds”, derived from the June 24 Harmony Bridge Heist, when hacker stole over $100 million from Harmony blockchain bridge.

“Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Brian E. Nelson, under Secretary of the Treasury for Terrorism and Financial Intelligence. “Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”

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