Regulation

Blockchain Association & DeFi Education Fund Defend Tornado Cash

Blockchain Association & DeFi Education Fund Defend Tornado Cash

The case for Tornado Cash is getting support from prominent crypto policy and advocacy groups. According to case filings brought against the U.S. Treasury Department, the Blockchain Association and DeFi Education Fund have filed an amicus curiae brief in support of the plaintiff's motion for a partial summary judgement.

Tornado Cash was sanctioned by the U.S. Treasury Department on the contention that it helped North Korean hacking collective Lazarus Group funnel roughly $7 billion worth of funds from various exploits. The Lazarus Group is infamous in the crypto industry for stealing from prominent DeFi protocols. The sanction on Tornado Cash resulted to the arrest of Alexy Pertsev, its creator. On August Pertsev was arrested in the Netherlands on charges of money laundering, sparking public outcry.

In response to the widespread exploits, the sanction was imposed by the Treasury Department's Office of Foreign Assets Control (OFAC) on Tornado Cash last year, effectively placing addresses allegedly connected with the mixer on its Specially Designated Nationals and Blocked Persons List. Such a designation makes it illegal for U.S. persons to interact with those addresses, under threat of significant fines and imprisonment.

Plaintiffs on the Tornado Cash case (Van Loon et al) argue that OFAC violated the Administrative Procedures Act (APA) by sanctioning an entity not liable to its sanction, infringing on users' right to free speech and depriving them of property (cryptocurrency held in the mixer) without due process. The motion for partial summary judgment on the counts of APA violation and free speech were filed on April 5.

In their brief, the Blockchain Association and DeFi Education Fund contend that Tornado Cash is software, not a person or property, and serves an essential function in preserving user privacy.

"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," states Kristin Smith, CEO of Blockchain Association.

The brief also elaborated on previous legal arguments presented for the Tornado Cash case, saying that the OFAC's sanctions are "not in accordance with law for yet another reason: the sanctions are arbitrary and capricious."

The amicus brief reiterated their position in the following statement:

"Such tools allow users to reclaim privacy that would be available as a matter of course in other contexts while retaining the benefits that come with using blockchain technology."

The two organizations throwing support behind Tornado Cash are not alone, though, as crypto think tank Coin Center also filed a lawsuit against the Treasury in October, calling the sanctions "unprecedented and unlawful." Coinbase' Chief Legal Officer Paul Grewal also came out in support of Tornado Cash, arguing that sanctions should "target bad actors, not technology." Coinbase released funding for the lawsuit.

According to court documents, a pretrial conference for the parties and their respective counsels is scheduled for April 23rd.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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