Coinbase backs lawsuit to overturn Tornado Cash ban

The American cryptocurrency exchange Coinbase has backed an appeal to overturn sanctions on the crypto mixer Tornado Cash, imposed by U.S. authorities.

A few months ago, Coinbase backed a legal challenge to sanctions imposed by the US govt against Tornado Cash. Today the plaintiffs filed a motion for summary judgment, asking the court to reopen TC for all. Their arguments are simple but powerful. 1/10 https://t.co/xSngWKxM3x

— paulgrewal.eth (@iampaulgrewal) April 5, 2023

On April 5, six people appealed OFAC’s decision to ban Tornado Cash. They argue that the agency exceeded its authority, and its actions violated the First Amendment of the U.S. Constitution on freedom of speech.

Coinbase’s Chief Legal Officer Paul Grewal noted that the plaintiffs “are among thousands of law-abiding Americans who want to safeguard their privacy”.

“The government cannot sanction Tornado Cash, because it is not a foreign individual or a corporate entity. That should be obvious, since TC is software,” he explained.

Grewal also added that “no one can modify, delete, or otherwise control the 20 smart contracts underlying the crypto mixer”.

Argument #3: even if an ownerless thing could somehow be property, these 20 smart contracts aren’t owned at all—not by any foreign national or sanctioned person, and certainly not by people who happen to have a certain crypto token in their wallets. 7/10

— paulgrewal.eth (@iampaulgrewal) April 5, 2023

“These smart contracts do not belong to any foreign national or sanctioned person, and certainly not to people who happen to have a certain token in their wallets,” explained the Coinbase attorney.

Back in August 2022, OFAC placed Tornado Cash on the sanctions list on suspicion of laundering more than $7 billion in cryptocurrencies. The service was used, among others, by the North Korean hacker group Lazarus Group.

On August 12, Dutch authorities arrested the service’s developer Alexey Pertsev. He is suspected of involvement in laundering funds and concealing illicit financial flows.

In February 2023, the court refused to grant bail to the Russian, due to a high flight risk. Pertsev denies any allegations against him. The next hearing in the case is scheduled for late April.