Tornado Cash Lawsuit Sparks Controversy Over Crypto Sanctions

A group of Tornado Cash users has taken a noteworthy step in response to the decision by the officials of the United States Treasury Department to include the cryptocurrency mixer in the list of sanctioned organizations. They have filed an appeal in federal court. Attorneys representing Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch submitted a petition to the US Fifth Circuit Court of Appeals on November 13.

Tornado Cash Lawsuit Ignites Controversy

In their petition, the attorneys argue that the Treasury Department has expanded its authority to an extent that is beyond recognition while imposing sanctions on Tornado Cash. The report refers to a Texas federal judge’s ruling in August, which determined that the crypto mixer could be subject to sanctions under the legal regulatory authority of the Office of Foreign Assets Control. The application submitted on November 13 states:

“The district court erred in concluding that the Department satisfied the three requirements necessary for an appointment under the Ministry and the North Korea Act. The Department’s action is unlawful and exceeds the statutory authority under the Administrative Procedure Act.”

According to the arguments put forth by the plaintiffs, the smart contracts associated with Tornado Cash, as defined in the lawsuit, are immutable and ownerless, and therefore do not meet the Treasury’s definition of sanctioned property. The appeal also disputes the Treasury’s definition of interest, claiming that Tornado Cash users do not have a legal, equitable, or beneficial interest in their smart contracts.

Support from the Crypto Community

The application in question is the latest legal step in a case initially filed by six individuals in September 2022. The Office of Foreign Assets Control added Tornado Cash to the Specially Designated Nationals list in August 2022, a move that sparked criticism and outrage within the industry.

Coinbase Chief Legal Officer Paul Grewal expressed support for the plaintiffs’ efforts in a tweet on November 13, stating that the appeals court should carefully consider the petition. The crypto exchange has openly backed Van Loon and the other plaintiffs since the lawsuit was filed in September 2022.

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