April 19, 2024
Tornado Cash Users Appeal U.S. Treasury Sanctions in Federal Court
Policy & Regulation

Tornado Cash Users Appeal U.S. Treasury Sanctions in Federal Court

A group of users of the privacy-focused cryptocurrency mixer, Tornado Cash, has appealed a ruling. That upholds the U.S. Treasury Department’s decision to designate the platform as a sanctioned entity.

Filed on November 13 in the U.S. Court of Appeals for the Fifth Circuit, the appeal contends that the Treasury “stretched [its] authority beyond recognition” in imposing sanctions on Tornado Cash transactions. The users argue that the smart contracts identified in the lawsuit were “immutable and ownerless,” falling outside the U.S.

Treasury’s regulatory definition of “property” is subject to sanctions. The appeal also challenges the Treasury’s definition of “interest,” asserting that Tornado Cash has no “legal, equitable, or beneficial interest” in users’ smart contracts. This legal move follows an August decision by a Texas federal judge. Who ruled that Tornado Cash could be sanctioned under the regulatory purview of the Treasury’s Office of Foreign Assets Control.

Tornado Cash was added to the Specially Designated Nationals list by the U.S. Treasury’s Office of Foreign Assets Control in August 2022. Coinbase’s chief legal officer, Paul Grewal, expressed support for the users, noting that the appellate court would carefully consider the filing. Coin Center, a crypto advocacy group, also filed a lawsuit against the U.S. Treasury over Tornado Cash. Losing the case in a Florida federal court and subsequently filing an appeal in the U.S. Court of Appeals for the Eleventh Circuit on November 6.

The U.S. Justice Department has pursued criminal charges against individuals associated with Tornado Cash. Including co-founders Roman Storm and Roman Semenov, who were charged with conspiracy to commit money laundering, sanctions violations, and operating an unlicensed money-transmitting business in August. Storm was released on a $2-million bond and pleaded not guilty in September. While Semenov was not in custody at the time of publication.

Alexey Pertsev, another Tornado Cash co-founder, was arrested in the Netherlands in August 2022 on similar charges related to money laundering and was released in April 2023 to await trial. The legal developments highlight the ongoing challenges and complexities within the regulatory landscape surrounding privacy-focused tools and decentralized services in the cryptocurrency space.

Image: Wikimedia Commons

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