SNEAK PEEK

• A coinbase-backed group takes legal action against the U.S. Treasury over Tornado Cash sanctions.
• The court action signals a fresh attempt to get Tornado Cash’s penalties lifted.
• The plaintiffs in the case alleged that OFAC breached a section of the IEEPA.

According to reports, six people, with the backing of Coinbase, have submitted a motion for a partial summary judgment to reverse the Treasury Department’s decision to impose sanctions on the well-known cryptocurrency mixer Tornado Cash. To resolve the first two counts of the first complaint brought by the U.S. Office of Foreign Asset Control (OFAC) in September 2022, the plaintiffs submitted the motion on April 5 in a Texas District Court.

The court action signals a fresh attempt to get Tornado Cash’s penalties lifted. The plaintiffs contend that OFAC overstepped its bounds and lacked sufficient grounds to impose the penalties. 

The case may reportedly have significant repercussions for how cryptocurrencies are regulated and how easily government authorities may punish companies involved in the cryptocurrency industry. With Coinbase’s assistance, the plaintiffs are prepared to seriously contest the government’s activities, paving the way for a potentially ground-breaking judicial conflict, according to familiar sources.

According to reports, OFAC was charged with breaching the First Amendment’s free expression provision and going beyond its constitutional authority under the International Emergency Economic Powers Act (IEEPA). 

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

The charges alleged that by applying penalties that limit people’s capacity to participate in certain sorts of communication, OFAC had exceeded the limits of its jurisdiction under the IEEPA and violated the right to free expression.

Additionally, the plaintiffs in the case alleged that OFAC breached a section of the IEEPA that authorizes the treasury to take action against property in which a foreign country or foreign national has an interest. Furthermore, the plaintiffs claimed that OFAC’s sanctions went beyond the scope of this provision by targeting individuals and entities that did not have any connection to the targeted foreign countries or nationals.