Coin Center, a non-profit think tank on cryptocurrencies and public policy, announced Wednesday it was filing a lawsuit against the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC), alleging the agency overreached its authority when it sanctioned cryptocurrency mixer Tornado Cash in August.
See related article: What is the future for cryptocurrency mixers after U.S. sanctions on Tornado Cash?
- Filed in the U.S. District Court Northern District of Florida, the lawsuit alleges the agency only has the authority to block Americans from “transacting with a foreign person or major foreign entity,” as outlined in the International Emergency Economic Powers Act.
- The plaintiffs argue that when they use Tornado Cash they are not engaging with any foreign person or entity, and are only using publicly available Ethereum software to move their own property (digital assets) from one wallet they control to another.
- “Not only are we fighting for privacy rights, but if this precedent is allowed to stand, OFAC could add entire protocols like Bitcoin or Ethereum to the sanctions list in future, thus immediately banning them without any public process whatsoever,” tweeted Coin Center executive director Jerry Brito. “This can’t go unchallenged.”
- Crypto mixers are services that allow users to deposit cryptocurrency and withdraw the same figure minus a fee in different tokens, obfuscating the tokens’ path in an industry where all transactions are recorded on the blockchain.
- The OFAC sanctioned the mixer, alleging it had facilitated money laundering to criminal organizations such as the North Korean state-backed Lazarus Group through the more than US$7 billion worth of cryptocurrency it had handled since its creation in 2019.
- This is not the first lawsuit leveled at the OFAC for the sanctions; Coinbase Global Inc., the biggest U.S. cryptocurrency exchange, has helped organize and bankroll a class action lawsuit brought by six individuals who claim they have funds trapped in Tornado Cash.
See related article: Privacy vs. security: an international debate on Tornado Cash