The United States Treasury is facing a new legal challenge that aims to overturn the decision to sanction the Tornado Cash crypto mixer of six people backed by the Coinbase cryptocurrency exchange.
A motion was filed for partial summary judgment archived on April 5 in a Texas District Court, the Coinbase-backed plaintiffs petitioned the US Office of Foreign Assets Control (OFAC) to settle the first two counts of his original complaint presented in September 2022.
If granted, it would see the judge rule on some of the factual issues and leave others for trial.
The charges claimed that OFAC exceeded its legal powers under the International Emergency Economic Powers Act (IEEPA) and violated the free speech clause under the First Amendment to the US Constitution.
A few months ago, Coinbase backed a legal challenge to the sanctions imposed by the US government against Tornado Cash. Today the plaintiffs filed a motion for summary judgment, asking the court to reopen TC to everyone. His arguments are simple but powerful. 1/10 https://t.co/xSngWKxM3x
โ paulgrewal.eth (@iampaulgrewal) April 5, 2023
The plaintiffs first alleged that OFAC violated a section of the IEEPA that allows Treasury to take action against property in which a foreign country or foreign national has an interest.
The motion argued that since the provision only allows property-related actions against a foreign "national" or "person", it does not apply to open source software.
To strengthen their claim, the plaintiffs argued that the 20 or so smart contracts that provide the functionality to Tornado Cash should not be considered property under IEEPA because they cannot be owned:
"An immutable smart contract cannot be owned, is not owned, and the Department lacks the authority under IEEPA and North Korean Law to prohibit transactions with those smart contracts."
โNo one has the right to alter them. No one has the right to delete them," they added.
The second main argument put forward is that because ban Open Source Code, OFAC is violating the Free Speech Clause of the First Amendment of the United States Constitution.
Related: Treasury officials would have done more for national security by leaving Tornado Cash alone
The plaintiffs noted that OFAC has the authority to take action against "cryptocurrency thieves" like North Korea's Lazarus Group, but a "total ban is therefore grossly disproportionate," as money laundering only represents 0.05% of crypto transactions in 2021.
โBanning all uses of Tornado Cash is akin to banning the printing press in that a small fraction of users might post instructions on how to build a nuclear weapon,โ they added.
The motivation behind the motion is part of a broader effort to restore the Internet privacy rights of US citizens, the plaintiffs explained. It is the most recent introduction since individuals first sued the US Treasury Department in September.
The six plaintiffs behind the filing are Joseph Van Loon, Tyler Almeida. Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch. The presentation details that most of the group had previously interacted with Tornado Cash.
The legal battle takes place when Alexey Pertsev, the creator of Tornado Cash, faces his own in the Netherlands. he has been retained since August 18 on a series of money laundering charges.
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