The advocacy group was joined by the DeFi Education Fund in arguing that the crypto mixer has important social functions and that the sanctions from the Office of Foreign Assets Control could set a dangerous precedent.
Crypto advocacy groups Blockchain Association and DeFi Education Fund filed a brief in United States District Court in Austin in the case brought by six individuals against the United States Treasury Department over the sanctioning of Tornado Cash. The amicus (friend of the court) brief supports the plaintiff’s motion for a partial summary judgment.
The six plaintiffs in the case filed suit against the Treasury Department and associated parties in September after the Treasury’s Office of Foreign Assets Control (OFAC) placed addresses allegedly connected with the Tornado Cash cryptocurrency mixer on its Specially Designated Nationals and Blocked Persons List in August.
The agency accused Tornado Cash of laundering more than $7 billion, including hundreds of millions for the Lazarus Group of North Korean hackers. The designation makes it illegal for U.S. persons to interact with those addresses, under threat of large fines and imprisonment.
1/ Today, @BlockchainAssn and @fund_defi filed an amicus brief in Van Loon v. Treasury – fighting OFAC’s unlawful sanctions of the Tornado Cash software. OFAC’s decision raises serious regulatory and constitutional questions inhibiting the rights of many Americans.
We argue:
pic.twitter.com/dHxgrgBWNc— Marisa Tashman Coppel (@MTCoppel) April 12, 2023
The plaintiffs argued that OFAC violated the Administrative Procedures Act by sanctioning an entity that was not liable to its sanction, violating users’ right to free speech and deprivation of property (crypto tied up in the mixer) without due process. The plaintiffs filed a motion for partial summary judgment on the counts of APA violation and free speech on April 5.
Related: Tornado Cash dev says ‘sequel’ to crypto mixer aims to be regulator-friendly
In their brief, the Blockchain Association and DeFi Education Fund reiterated that Tornado Cash is software, not a person or property, and argued that it is an autonomous tool that serves an important function in preserving user privacy. Blockchain Association CEO Kristin Smith added in a statement:
“Ordinarily, OFAC would not consider sanctioning neutral tools used by some people for illicit activities, it would sanction the people committing those activities. The same perspective should apply to OFAC’s action against Tornado Cash.”
The brief expanded on the legal arguments already presented. It introduced the major questions doctrine in its discussion of OFAC’s authority, for example, and stated:
“OFAC’s sanctions are ‘not in accordance with law’ for yet another reason: the sanctions are arbitrary and capricious.”
It claimed that, if the sanction is allowed to stand, it would be “effecting a vast expansion of OFAC’s power.”
Crypto think tank Coin Center sued the same parties over Tornado Cash’s sanctioning in October. Tornado Cash creator Alexy Pertsev was arrested in The Netherlands several days after the initial OFAC Tornado Cash designation. He is accused of money laundering.
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