Court rejects Coinbase bid to lift sanctions on Tornado Cash

The federal court отклонил ходатайство backed by Coinbase regarding the illegality of sanctions against the Tornado Cash cryptocurrency mixer. Paul Grewal, Coinbase’s chief legal officer, said this.

The plaintiffs argued that the U.S. Treasury overstepped its authority, since the agency could not explain how the immutable open-source smart contracts in the case are ‘property’ subject to sanctions.

Accordingly, no one, including the creators, developers or holders of the native TORN tokens, has a ‘property interest’ in these smart contracts.

However, the court ruled that the ДАО that runs the mixer is a real legal entity, its structure hardly differs from that of a corporation. Moreover, it ‘reaps value’ from the service’s smart contracts, making it a reporting entity.

Commenting on the ruling, Paul Grewal said Coinbase will continue backing the suit and intends to appeal.

In August 2022, OFAC added Tornado Cash to the sanctions list, a site through which, according to the agency, criminals laundered more than $7 billion in crypto. Of that amount, more than $455 million are linked to the North Korean hacker group Lazarus Group.

Soon after, Coinbase funded the lawsuit against the Treasury, its head Janet Yellen and OFAC Director Andrea Gaki, seeking to overturn the sanctions against the mixer.

In April 2023, the Bitcoin exchange also joined the appeal in the case.

Earlier, during the court proceedings on the legality of blocking Tornado Cash, the U.S. Treasury compared holders of TORN tokens with terrorists from ‘Al-Qaeda’ (designated as a terrorist organization and banned in several countries).