Coin Center Could Challenge US Treasury Sanctions on Tornado Cash in Court

US-based crypto policy advocacy group Coin Center said it plans to “pursue administrative relief” for individuals affected by Tornado Cash sanctions imposed by the Treasury Department’s Office of Foreign Asset Control, or OFAC. .

In a blog post on Monday, Coin Center executive director Jerry Brito and research director Peter Van Valkenburgh claimed OFAC “exceeded its legal authority” when it named cryptocurrency mixer Tornado Cash and 44 associated wallet addresses on Specially Designated’s list. Nationals, or SDNs, on August 8. The directors claimed the Treasury’s actions may have violated the “constitutional rights of US residents to a fair trial and freedom of expression” and they were investigating to take the matter to court.

“By treating autonomous code as a ‘person’, OFAC exceeds its legal authority,” said Brito and Van Valkenburgh.

According to the pair, Coin Center will first engage with OFAC to discuss the situation and inform members of Congress. The advocacy group then assists individuals with funds tied up at one of the 44 USD Coin (USDC) and Ether (ETH) addresses associated with Tornado Cash by applying for a license to withdraw their tokens. After these actions, the organization will start challenging the sanctions in court.

Brito and Van Valkenburgh argued that, contrary to OFAC’s sanctions against cryptocurrency mixer in May – “an entity ultimately under the control of certain individuals” who better fit the definition of SDNs – “it cannot be said that Tornado Cash is a person who has been sanctioned.” According to Coin Center executives, this was due to the ETH addresses for the mixer’s smart contract:

“The Tornado Cash entity, which is believed to have implemented the Tornado Cash application, has no control over the application today,” said Brito and Van Valkenburgh. “Unlike Blender, the Tornado Cash entity cannot choose whether or not the Tornado Cash application blends, and cannot choose which ‘customers’ to accept and which to decline.”

They added:

“While typical OFAC actions only restrict expressive behavior (e.g. donating money to a particular Islamic charity), this action sends a signal – indeed it appears to be intended to send a signal – that a certain class of tools and software may not be used by Americans even for completely legitimate purposes. Even if this list is really and solely for stopping North Korean hackers from using Tornado Cash, and even if the chilling effect on Americans’ use of the tool was acceptable to OFAC for legitimate reasons in a collateral impact analysis, it might be not sufficient for a court.”

Related: Tornado Cash Community Fund Multisignature Wallet Is Lifted Amid Sanctions

Following the announcement of the sanctions against Tornado Cash, individuals involved in the controversial mixer reported being cut off from some centralized platforms during the controversy. Tornado Cash co-founder Roman Semenov reported that the developer platform GitHub suspended his account on Monday, and users of the mixer’s decentralized autonomous organization and the Discord channel said the two media were also going dark.

In June, Coin Center sued the US Treasury Department in federal court for making an unconstitutional amendment to the infrastructure law signed by President Joe Biden in November 2021. The group claimed that a provision in the law was intended to collect information about individuals involved in crypto transactions.