Coin Center Sues Treasury and OFAC Over Tornado Cash Sanctions

A non-profit organization called Coin Center filed a lawsuit against the US Treasury over its sanctioning of Tornado Cash in August. The crypto advocacy group is joined in its complaint by David Hoffman, a crypto asset manager, Patric O’Sullivan, and another anonymous plaintiff.

Coin Center Lawsuit Explained

Coin Center was quick to react to the sanctioning of Tornado Cash and the group published an analysis of the case already in August. While the analysis wasn’t entirely conclusive, the text hinted at the possibility the group would file a lawsuit at some point in the future.

The hint from the analysis became a reality when the non-profit filed an official complaint against the Treasury and OFAC. The lawsuit opens with an argument that the government overstepped its authority and acted to punish American investors under the guise of stopping a “foreign enemy.”

On August 8, 2022, the Biden Administration criminalized the use of Tornado Cash, an open-source software tool that helps Americans maintain their privacy while using cryptocurrency and related assets. It justified this action based on its power to sanction foreign enemies, even though Tornado Cash is not controlled by foreign enemies and Americans’ use of the technology does not involve foreign enemies. The Administration’s use of the foreign-affairs power to punish domestic cryptocurrency users was unprecedented and unlawful.

The lawsuit continues by stating the immense benefit of Tornado Cash, and similar crypto mixing services to Ethereum traders and investors as a state-of-the-art privacy tool. Coin Center also reaches for one of the key points of its August analysis—since nobody controls Tornado Cash, there is no entity that can lawfully be sanctioned.

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What are the Plaintiffs Demanding?

The Coin Center lawsuit lists four key counts that all require the sanctioning of Tornado Cash to be set aside. The first count argues that OFAC has no right of authority over Tornado Cash. The second argues the agencies’ actions were contrary to the law, and the third claims that the sanctioning fits the definition of an “arbitrary and capricious” action. 

The fourth count states that Tornado Cash, being a program on the blockchain that isn’t controlled by an individual, or an entity, falls under the protection of the First Amendment as it represents a form of free speech. Of note is a claim that the agencies that blacklisted the crypto mixer do not understand the technology behind it, or the sector it belongs to. Similar claims have been made in the past by other members of the wider crypto community, like Nathan Chastaine, a former employee of OpenSea.

The complaint also lists multiple requests for relief. Apart from demanding the criminalization of Tornado Cash be voided, the lawsuit also seeks to block any further attempts by the same agencies to similarly sanction the crypto mixer in the future. Coin Center is also requesting “an order awarding Plaintiffs their costs in this action, including attorneys’ fees,” and “any other relief that the Court deems just and proper.”

While perhaps the longest in the making, today’s complaint isn’t the first one attempting to void the Tornado Cash sanctions. Several investors filed their own complaint against the Treasury in early September.

Do you think the Coin Center complaint will be successful in voiding the blacklisting of Tornado Cash? Let us know in the comments below.