The United States Treasury Department is facing a second legal challenge after its decision in August to ban Tornado Cash, a cryptocurrency mixing service that hides the origins of coin transactions.
The suit, which was filed in the U.S. District Court for the Northern District of Florida on Wednesday, October 13, claims that Treasury sanctions violate its power and target cryptocurrency investors in the United States.
Coin Center, a crypto advocacy organization and user group that relied on Tornado Cash for regular privacy issues, listed 78th U.S. Treasury Secretary Janet Yellen as one of the defendants in their trial.
Tornado Cash accused of money laundering
Tornado Cash was charged with money laundering in August by the US Treasury’s Office of Foreign Assets Control.
The Office of Foreign Assets Control said Tornado has laundered more than $7 billion worth of cryptocurrencies since its inception in 2019. This figure includes some virtual currencies that were stolen by a Korean-funded hacker organization. North.
Additionally, the government agency sanctioned cryptocurrency wallets connected to Tornado Cash, in addition to a related piece of code known as smart contracts.
The lawsuit asserted that there are valid reasons for people to use privacy-enhancing technologies such as Tornado Cash. Following OFAC’s sanctions against the privacy mixer – which works by bundling money together to hide the sender of a particular transaction – these people are now essentially revealing their full transaction history to anyone viewing the network data.
“An order effectively requiring defendants to decriminalize the use of the 20 Tornado Cash addresses would allow plaintiffs to conduct their legitimate business with some measure of anonymity, use their preferred software tool without fear of punishment, and engage in significant expressive associations,” the lawsuit said.
Other plaintiffs involved in the case include OFAC Director Andrea Gacki, Patrick O’Sullivan, a software engineer from Florida, David Hoffman, an investor from New York and an unknown supporter of Ukraine.
Finbold announced in September that cryptocurrency exchange Coinbase (NASDAQ:COIN) was funding a lawsuit against the United States Treasury Department filed by users of the Ethereum (ETH) mixing service Tornado Cash.
The Treasury under fire
The Treasury Department has become the target of severe backlash, with several cryptocurrency market participants questioning the rationale for the move.
Following the notorious Terra (LUNA) price crash, chief executive of cryptocurrency exchange Kraken said the regulatory fines were a “gut reaction” to protect consumers after the event.
As a direct result, Microsoft, owner of GitHub, removed the source code and terminated the user accounts of anyone who contributed code to the Tornado Cash project. However, Mathew Green, professor of computer science at Johns Hopkins University, reuploaded the code to make it available for educational and scientific purposes.