Key takeaways:
- A group of Tornado Cash users filed an appeal in federal court in response to a decision that supported the US Treasury Department’s decision.
- The six people filed the claim in September 2022, and this filing is the most recent legal action in that case.
In response to a decision that supported the US Treasury Department’s decision to include the cryptocurrency mixer on its list of sanctioned businesses, a group of Tornado Cash users filed an appeal in federal court.
Attorneys for plaintiffs Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch contended that the US Treasury “stretched authority beyond recognition” in approving Tornado Cash transactions in a filing made on November 13 to the US Court of Appeals for the Fifth Circuit.
The filing was made in reaction to an August ruling by a federal judge in Texas, who determined that the cryptocurrency mixer might be sanctioned under the regulatory authority of the Treasury’s Office of Foreign Assets Control. The filing dated November 13 said:
“The district court erred by concluding that the Department satisfied three of the requirements for a designation under [International Emergency Economic Powers Act] and the North Korea Act,”
The plaintiffs claim that the Tornado Cash smart contracts that were the subject of the litigation were “immutable and ownerless” and did not fit the US Treasury’s regulatory definition of “property” that could be sanctioned.
In addition, the appeal contested the Treasury’s interpretation of “interest,” arguing that Tornado Cash lacks a “legal, equitable, or beneficial interest” in the smart contracts that its customers have.
The six people filed the claim in September 2022, and this filing is the most recent legal action in that case. In August 2022, Tornado Cash was added to the list of Specially Designated Nationals by the US Treasury’s Office of Foreign Assets Control, which incited indignation and resentment among many in the industry.
In a November 13 X (formerly Twiter) thread, Coinbase Chief Legal Officer Paul Grewal expressed his support for the plaintiffs’ efforts and stated that the appellate court would give the filing significant consideration. Since the lawsuit in September 2022, Van Loon and the other plaintiffs have received public backing from the cryptocurrency exchange.
In a similar vein, the cryptocurrency advocacy group Coin Centre failed in federal court in Florida after launching its own lawsuit against the US Treasury regarding Tornado Cash in October 2022. On November 6, the group filed an appeal with the United States Court of Appeals for the Eleventh Circuit.
US authorities have also brought criminal accusations against those connected to Tornado Cash. In August, the Justice Department accused co-founders Roman Storm and Roman Semenov of conspiring to violate sanctions, launder money, and run an unregistered money-transmitting enterprise.
After being arrested, Storm was freed on a $2 million bond and entered a not-guilty plea to all charges in September. As of the time of publication, Semenov was not in custody.
In August 2022, Tornado Cash co-founder Alexey Pertsev was taken into custody by Dutch authorities on comparable allegations pertaining to money laundering. In April 2023, he was set free pending his trial.
