Coinbase and six individuals, have filed a motion for partial summary judgment in a Texas District Court, aiming to overturn the decision to sanction crypto mixer Tornado Cash.
The plaintiffs claim that the US Office of Foreign Asset Control (OFAC) exceeded its statutory powers under the International Emergency Economic Powers Act (IEEPA) and violated the free speech clause of the US Constitution’s First Amendment.
The first claim is based on the argument that OFAC breached a section of the IEEPA that allows the Treasury to take action against the property in which a foreign country or foreign national has an interest, and that the provision only applies to foreign “national” or “person” and not open-source software.
The second claim is that OFAC is violating the free speech clause of the First Amendment to the US Constitution by banning the open-source code.
The plaintiffs argued that the OFAC has the authority to take action against “crypto thieves” like North Korea’s Lazarus Group, but a “total prohibition is thus grossly disproportionate,” as money laundering only accounted for 0.05% of crypto transactions in 2021.
To support the argument that smart contracts should not be considered property under IEEPA, the plaintiffs noted that an immutable smart contract is incapable of being owned.
Also that the Department lacks authority under IEEPA and the North Korea Act to prohibit transactions with those smart contracts. They added that no one has the right to alter or delete them.
The plaintiffs said that the motion is part of a broader effort to restore internet privacy rights for US citizens. The six plaintiffs behind the filing are Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch.
The filing details that most of the group had previously interacted with Tornado Cash.
The legal battle comes as Alexey Pertsev, the creator of Tornado Cash, faces his own troubles in The Netherlands. He has been held since Aug. 18 on a series of money laundering charges.
The motion for partial summary judgment, if granted, would see the judge rule on some of the factual issues while leaving others for the trial.
The legal challenge against the decision to sanction Tornado Cash by the US Treasury was first filed in September 2022. The plaintiffs aim to overturn the decision to sanction Tornado Cash and restore internet privacy rights for US citizens.
Coinbase & Tornado Cash Ban
In conclusion, six individuals, backed by Coinbase, have filed a motion for partial summary judgment in a Texas District Court to overturn the decision to sanction Tornado Cash by the US Treasury. The plaintiffs argue that OFAC exceeded its statutory powers under the IEEPA and violated the free speech clause of the First Amendment.
The motion is part of a broader effort to restore internet privacy rights for US citizens. If granted, the judge would rule on some factual issues while leaving others for trial. The legal challenge was first filed in September 2022. Meanwhile, the creator of Tornado Cash, Alexey Pertsev, is facing money laundering charges in the Netherlands.