Key Takeaways:
- US District Judge Robert Pitman rejects appeal from six Tornado Cash users aiming to lift sanctions.
- Tornado Cash was included in the US Treasury’s Office of Foreign Assets Control SDN List in August 2022.
A U.S. Federal Court has ruled in favor of the United States Treasury Department’s authority and decision to impose sanctions on the widely-used cryptocurrency mixer, Tornado Cash, due to money laundering concerns. U.S. District Judge Robert Pitman upheld the government’s stance and dismissed a legal challenge initiated by six Tornado Cash users, which included employees from Coinbase.
The Department of Treasury’s Office of Foreign Assets Control’s inclusion of Tornado Cash in the Specially Designated Nationals and Blocked Persons (“SDN”) List was uncontested. The plaintiffs’ argument against the designation was that it goes beyond the Department’s authority regarding foreign nationals’ property interests and violates the Free Speech Clause.
As per the government’s explanation, cryptocurrency mixing services, referred to as “mixers” or “tumblers,” are designed to obfuscate the origin or owner of specific cryptocurrency units, thus enabling users to maintain anonymity.
The plaintiffs, comprising six users of Tornado Cash, had sought a summary judgment that was ultimately declined.
The Tornado Cash users contended that the government’s actions were illegal as they infringed upon their First Amendment rights. They asserted that they were deprived of the opportunity to participate in “socially beneficial speech” since they had intended to employ Tornado Cash for “contributions to significant political and societal initiatives.”
The ruling identifies the six users as Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch.
Judge Pitman held a contrary viewpoint, stating that the plaintiffs had “failed to demonstrate that the government’s actions have any bearing on the First Amendment.”
Paul Grewal, the Chief Officer of Coinbase and a supporter of the lawsuit, stated that they maintain their belief in the legitimacy of the plaintiffs’ challenge against OFAC’s action concerning Tornado Cash.
The court further emphasizes that the Treasury operated within its designated authority, stating, “OFAC’s conclusion that the smart contracts represent property, or a form of property interest, does not exhibit evident inconsistency with the regulatory definitions of said terms.”
However, the court also acknowledges that these definitions have been established by OFAC through its own implementing regulations, thereby bestowing them with an expansive scope.
