A federal judge in Texas has ruled in favor of the US Treasury Department in a lawsuit involving Tornado Cash, a cryptocurrency mixer. The judge, Robert Pitman, denied a motion for summary judgment filed by six individuals backed by Coinbase, a major crypto urrency exchange. These individuals had contested the Treasury's designation of Tornado Cash as a Specially Designated National, arguing that it exceeded the agency's authority and violated free speech rights. However, the judge approved a similar motion from the US Treasury Department.
The case involved around the classification of Tornado Cash. The plaintiffs claimed that the Treasury's designation of the mixer exceeded its legal authority and violated free speech rights. On the other hand, the government argued that Tornado Cash could be designated and that it had a property interest in the smart contract. The judge's ruling supported the government's stance, stating that Tornado Cash is an entity that falls under OFAC regulations and that its designation did not exceed the Treasury's authority.
The dispute began when the US Treasury Department's Office of Foreign Assets Control (OFAC) added Tornado Cash to its list of Specially Designated Nationals in August 2022. This move was met with criticism from many cryptocurrency users who saw it as government overreach. The six individuals , with backing from Coinbase, filed a lawsuit in September 2022 challenging the designation. The judge's ruling indicates that while developers can analyze and understand the code behind Tornado Cash, they cannot execute it to conduct cryptocurrency transactions.
Coinbase's Chief Legal Officer, Paul Grewal, expressed the exchange's intention to support an appeal to the Fifth Circuit in response to the judge's decision. This ruling comes as Coinbase is also involved in a civil lawsuit with the US Securities and Exchange Commission ( SEC) regarding different matters. In both the OFAC and SEC cases, Coinbase has argued that the government's actions represent an overreach of its powers granted by Congress.
