The United States Department of the Treasury is facing a second legal challenge after its decision in August to ban Tornado Cash, a cryptocurrency mixing service that masks the origins of coin transactions.
The complaint that was filed in the U.S. District Court for the Northern District of Florida on Wednesday, October 13, asserts that the Treasury’s sanctions violate its power and target investors in cryptocurrencies in the United States.
Coin Center, a crypto advocacy organization and a group of users that depended on Tornado Cash for regular privacy concerns, listed the 78th United States secretary of the treasury, Janet Yellen, as one of the defendants in their lawsuit.
Tornado Cash accused of money laundering
Tornado Cash was accused of money laundering in August by the Office of Foreign Assets Control of the United States Treasury.
The Office of Foreign Assets Control said that Tornado had laundered over $7 billion worth of cryptocurrencies since it was founded in 2019. This figure includes some virtual currencies that were stolen by a hacker organization funded by North Korea.
Additionally, the governing agency sanctioned cryptocurrency wallets connected to Tornado Cash, in addition to a related piece of code known as smart contracts.
The lawsuit asserted that there are valid reasons for people to make use of privacy-enhancing technologies such as Tornado Cash. As a result of OFAC’s penalties against the privacy mixer – which works by pooling money to obscure the sender of any particular transaction – these individuals now essentially reveal their complete transaction history to anybody who is looking at the network data.
“An order effectively requiring Defendants to decriminalize use of the 20 Tornado Cash addresses would allow Plaintiffs to conduct their legitimate activities with some measure of anonymity, use their preferred software tool without fear of penalties, and engage in important expressive associations,” the suit stated
Other plaintiffs involved in the case include OFAC Director Andrea Gacki, Patrick O’Sullivan, a software engineer from Florida, David Hoffman, an investor from New York, and an unknown supporter of Ukraine.
Finbold reported in September cryptocurrency exchange Coinbase (NASDAQ: COIN) is funding a lawsuit against the United States Treasury Department filed by users of the Ethereum (ETH) mixing service Tornado Cash.
Treasury comes under fire
The Treasury Department has become the target of severe backlash, with several participants in the cryptocurrency market questioning the rationale behind the decision.
Following the notorious Terra (LUNA) price fall, the Chief Executive Officer of the cryptocurrency exchange Kraken made the statement that the regulatory fines were a “knee-jerk reaction” to safeguard consumers following the event.
As a direct consequence of this, Microsoft, who owns GitHub, removed the source code and terminated the user accounts of any persons who had contributed code to the Tornado Cash project. However, Mathew Green, a professor of computer science at Johns Hopkins University, re-uploaded the code in order to make it available for educational and scientific reasons.