Crypto think tank Coin Center has been one of the most critical voices against the U.S. Treasury and the sanctions imposed on the Ethereum-based decentralized exchange (DEX) Tornado Cash. The platform was sanctioned by the U.S. government for its alleged ties to illegal activities in a decision that might have set a dangerous precedent.
Coin Center is trying to reverse the decision and hold a line that has always existed between people and entities, eligible for sanctions, and technology, considered neutral until the Tornado Cash decision.
The lawsuit was filed in the Northern District of Florida in the Pensacola Division against The U.S. Secretary of the Treasury Janet Yallen, the Department of the Treasury, and the Office of Foreign Assets Control (OFAC) and its director Andrea Gacki.
1/ Today Coin Center filed suit in federal district court against OFAC challenging its authority to sanction Tornado Cash immutable smart contracts.
— Jerry Brito (@jerrybrito) October 12, 2022
Coin Center Goes Against The U.S. Government
Per an official announcement, Coin Center filed the lawsuit against the U.S. government in cooperation with other anonymous non-profits, donors, and individuals including David Hoffman, co-host of the popular podcast “Bankless”.
I’m suing the Department of Tresury!
I got dusted from @TornadoCash, and now every year of my life I am FORCED file a report reaffirming that I’m not a criminal.
I don’t intend to waste my time like that.
David Hoffman vs Janet Yellen
Let’s dance pic.twitter.com/GVCMuzvpEH
— DavidHoffman.bedrock ??? (@TrustlessState) October 12, 2022
Coin Center stated the following, backing up their arguments against the OFAC sanctions imposed on Tornado Cash:
Plainly, given the specific powers granted to the Treasury Department by Congress, these are not the kinds of activities that can be censored or blocked. The Tornado Cash sanction was, therefore, made in excess of statutory authority and must be set aside.
The think tank will support its lawsuit on four claims. First, the non-profit claims that the U.S. Congress provided the Executive branch with limited powers to sanction individuals and entities. Therefore, these limitations are extended to OFAC.
In order for the government body to issue sanctions, these must be imposed on U.S. persons and their interactions with “foreign person or majority foreign entity or the property of that or entity”. In that sense, Coin Center claims that the Tornado Cash software and Ethereum-based smart contract failed to meet the criteria that justify the sanctions.
Since the sanctions were not back a law or legitimate power granted to the U.S. president, the think tank claims that they are “contrary to law” classifying them as being “arbitrary and capricious”. As a consequence of the OFAC measures against Tornado Cash, many users in the United States lost access to their funds.
As Bitcoinist reported, in an attempt to comply with the sanctions, the front-end of several decentralized finances (DeFi) projects locked out users that interacted with the crypto exchange after the sanctions. However, many high-profile users and celebrities were blocked after receiving small quantities of Ether from the Tornado Cash contract.
Coin Center stated the following on this situation and how the sanctions have become a headache for the regular user:
they’ve been attacked by malicious continued use of the smart contract that saddles them with indefinite reporting requirements or else criminal penalties through no fault of their own. Meanwhile, the Treasury has issued statements that directly contradict their own rules.
OFAC Crossed A Line, Coin Center Pushes Back
Finally, the lawsuit states that U.S. individuals are being denied an “essential” and “self-evident rights” by blocking a tool to make private transactions and donations. Coin Center is one of the Tornado Cash users negatively impacted by the sanctions, they used to be able to receive donations via its platforms.
The lawsuit lists several cases of non-profits and people using Tornado Cash to support their projects, and organizations, that are now unable to use it. Including the “substantial support for the defense of Ukraine”.
At the time of writing, there are no statements about the lawsuit from the U.S. Department of Treasury or the OFAC. The crypto think tank ended its announcement by saying: “Privacy is normal, and when we win our lawsuit, using Tornado Cash will be normal again”.
