A group of users of the cryptocurrency mixer Tornado Cash has taken legal action by filing an appeal in federal court, contesting the US Treasury Department's decision to include the mixer in a list of sanctioned entities. Attorneys plaintiffs representing Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch filed their appeal on November 13 with the US Court of Appeals for the Fifth Circuit. They argued that the Treasury Department had overstepped its authority in approving the sanction against Tornado Cash, contending that its powers had been “changed beyond recognition.”
The appeal responds to a federal judge's August ruling in Texas, affirming that cryptocurrency mixers could face sanctions under the regulatory authority of the Treasury Department's Office of Foreign Assets Control (OFAC). The plaintiffs assert that the Treasury Department failed to meet the designation requirements under the International Emergency Economic Powers Act and the North Korea Act, alleging violations of the law and an overreach of statutory authority under the Administrative Procedure Act.
The plaintiffs' filing challenges the Treasury Department's interpretation of “property” in reference to Tornado Cash's smart contracts, claiming they are “immutable and ownerless” and do not align with the regulatory definition of sanctioned property. Additionally, it questions the Department's definition of “ interest,” arguing that Tornado Cash holds no legitimate, equitable, or beneficial interest in the smart contracts of its users.
This appeal is the latest development in a lawsuit initiated by the six individuals in September 2022 against the Treasury Department's decision to designate Tornado Cash as a Specially Designated National. The move by the Treasury Department triggered widespread criticism and discontent within the cryptocurrency community.
Coinbase's Chief Legal Officer, Paul Grewal, expressed support for the plaintiffs in a November 13 post on X (formerly Twitter), affirming that the appeals court would diligently consider the application. Coinbase has been publicly backing Van Loon and other plaintiffs since the was lawsuit filed in September 2022. Coin Center, a cryptocurrency advocacy group, also challenged the Treasury Department's decision over Tornado Cash in a lawsuit filed in October 2022 but faced defeat in a Florida federal court. The organization lodged an appeal with the US Court of Appeals for the 11th Circuit on November 6.
In parallel, US authorities have pursued criminal charges against individuals connected to Tornado Cash. Co-founders Roman Storm and Roman Semenov were charged by the Justice Department in August with various offenses including money laundering and operating an unlicensed money transfer business. Storm pleaded not guilty to the charges in September after being released on $2 million bail, while Semenov was not in custody at the time. Furthermore, Alexey Pertsev, another co-founder, was arrested by Dutch authorities on similar money laundering charges in August 2022, subsequently being released pending trial in April 2023.
