In response to sanctions, six users of Tornado Cash, the crypto mixer service, are suing the United States Treasury. They’re also suing Treasury Secretary Janet Yellen, among other officials. The United States Treasury hit Tornado Cash with heavy sanctions in early August. Allegedly, the decentralized application facilitated the laundering of $7 billion in cryptocurrency.
The lawsuit
Coinbase security analyst Tyler Almeida and Ethereum protocol developer Preston Van Loon are critical plaintiffs in the case. Almeida allegedly used the service to make crypto donations to Ukrainian defense efforts amid Russia’s invasion. The lawsuit maintains that the Treasury impeded his First Amendment rights by sanctioning Tornado Cash, preventing his contributions.
Van Loon says he used Tornado Cash to fund an Ethereum node and staking service ahead of the Merge. Now he has thousands of dollars in ETH tied up due to the sanctions. Also, Paul Grewal, Coinbase’s head lawyer, added he believes the Treasury overstepped its authority by placing sanctions on Tornado Cash. Additionally, Coinbase CEO Brian Armstrong is funding the legal expenses for the plaintiffs. Grewal likens the sanctions to the government banning the use of a highway after bank robbers used it to escape.
Tornado Cash mixer controversy
Reports say that hackers laundered 75% of crypto stolen from the Ethereum blockchain through the Tornado Cash service. Additionally, the Treasury alleges that the North Korean-sponsored hacker collective, the Lazarus Group, was one of the launderers.
In response, Dutch authorities arrested Alexey Pertsev, a Tornado Cash developer, for suspected cooperation in the laundering. Consequently, his arrest sparked protests in Amsterdam, where authorities arrested Pertsev. Though incarcerated since August 10 and denied bail, authorities have not officially charged Pertsev with a crime.
The backlash from the web3 community surrounds liability. Tornado Cash operates as a blockchain smart contract. Meaning back-end developers have no contact with users. Consequently, users in the United States have their cryptocurrency stuck in limbo thanks to the Treasury’s sanctions.
