Coinbase Backs Suit Against Treasury Over Tornado Cash Sanctions

Coinbase is financing a federal lawsuit against the U.S. Treasury Department because of its sanctions against the Tornado Cash cryptocurrency mixing service.

According to multiple published reports Thursday (Sept. 8), the suit was filed at the U.S. District Court in Waco, Texas, by a group of Coinbase employees and Tornado users. In an entry on the company blog Thursday, Coinbase CEO Brian Armstrong argued that the actions of the Office of Foreign Assets Control (OFAC) will hamper innovation in his industry.

“As one of the largest companies in crypto, we have a responsibility to defend the crypto industry against actions that go too far and treat crypto on an uneven playing field,” he wrote. “It’s not enough to just say we disagree and sit on the sidelines. That’s why we’re funding and supporting this lawsuit.”

As PYMNTS reported, the Treasury’s OFAC sanctioned Tornado Cash in early August to settle claims that it played a role in laundering more than $7 billion worth of virtual currency since its launch in 2019.

Read more: With Tornado Cash Sanctions, Feds Seek to Lift Crypto’s Veil of Anonymity

That money reportedly included more than $455 million allegedly stolen by the Lazarus Group, a North Korea-sponsored hacking organization sanctioned by the U.S. the same year.

The OFAC also sanctioned a number of bitcoin and ether wallet addresses, barring financial institutions (FIs) — including crypto exchanges — from doing business with them. Americans are forbidden from using the Tornado Cash service.

But the lawsuit claims the government overstepped its authority to block financial transactions benefiting foreign terrorists. It claims that the department may have unwittingly ensnared law-abiding Americans carrying out legitimate digital commerce on a cryptocurrency service that provides added privacy and security.

“None of the plaintiffs is a terrorist or a criminal,” attorneys for the Tornado Cash customers said in the complaint. “None supports terrorism or illegal activity. None launders money. Each is an American who simply wants to engage in entirely lawful activity in private.”

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