Tornado Cash is a platform that hides the path of Etherium coins in the blockchain by mixing transactions. The Tornado Cash mixer provided a sufficient level of anonymity, and thus quickly became one of the most popular tools for attackers. This was actually one of the main arguments when the US Treasury Department's Office of Foreign Assets Control (OFAC) added the mixer to its Specially Designated Nationals and Blocked Persons (SDC) list in August 2022, thus imposing sanctions on the Etherium wallets associated with the service. The same applied to addresses that interacted with the platform.

While there may still be questions about the authorities’ actions, the blocking of Tornado Cash has generally borne fruit. At the very least, TRM Labs analysts attribute this event to the fact that hacker activity declined in the first quarter of 2023. The latter may in theory realise that it won’t be as easy to confuse the investigation without the popular cryptomixer, so they don’t go for the crime.

What will happen to Tornado Cash

Official government sources claim that Tornado Cash has helped launder the equivalent of more than $7 billion in funds since its inception in 2019. The mixer has also been actively used by hacker groups based in North Korea.

According to Decrypt sources, former users of Tornado Cash have filed a class action lawsuit following the closure of Tornado Cash, which also mentions Treasury Secretary Janet Yellen and Office of Foreign Assets Control (OFAC) director Andrea Gaki.

In September, the lawsuit received strong support from cryptocurrency exchange Coinbase. The latter has even borne a significant portion of the legal fees.

Coinbase CEO Brian Armstrong has personally joined the plaintiffs’ claims against the Treasury Department. On his blog, he shared a post on the subject. The following quote from Brian explains why sanctions against the cryptomixer should not be overlooked. Here it is.

Imposing sanctions on open source software is like permanently blocking a highway because burglars used it to flee the scene. This is not the best way to solve the problem. Such actions lead to the punishment of people who have done nothing wrong.


By the way, Alexei Pertsev, the developer detained in the Tornado Cash case, was released under house arrest at the end of April 2023. There he will wear an electronic bracelet and await trial in such conditions.


Now the plaintiffs have made new arguments to the court regarding the Treasury Department’s sanctions problems. They were commented by Coinbase General Counsel Paul Grewal on his Twitter.

The plaintiffs make four arguments, but they all boil down to the same problem. The government is trying to ban the use of open source software using the Property Sanctions Act. Since this is not what the law was designed to do, it cannot be applied.

First argument: the sanctions imply that all owners of a native cryptomixer token called TORN are part of an organisation called Tornado Cash. Naturally, this is not the case. Still, TORN has been and is traded on many exchanges, so it can be bought by someone who doesn’t know that Tornado Cash exists at all.

Second argument: the law under which the sanctions were imposed deals exclusively with property. Property is something that can be owned. However, the open source code of Tornado Cash is in the public domain and is not owned by any one entity.

The third argument is contained in Greval’s next tweet.

No one – neither the founders, nor the developers, much less the people who happen to have TORN in their wallets – has a proprietary interest in these immutable smart contracts.

The fourth argument concerns an alleged violation of the First Amendment, which protects Americans’ free speech rights. Here is the relevant quote.

The sanctions against Tornado Cash unconstitutionally restrict free speech under the First Amendment. Plaintiffs used the software to protect their First Amendment privacy.

Tornado Cash has become a popular means of ensuring the anonymity of financial flows within the crypto industry. The plaintiffs insinuate that people have a right to remain anonymous, well, using the cryptomixer code does not violate the rest of the law. At the same time, it is the government that has allegedly violated the constitutional rights of citizens.

Grewal made the following point at the end of his Twitter thread: the plaintiffs are not demanding specific rules to regulate the crypto industry, they just want the Treasury Department’s actions to coincide with laws set by the US Congress. And within those laws, Tornado Cash may well operate. Unfortunately, it will be difficult to win a case with this position. Still, the cryptomixer’s reputation is seriously tarnished in front of politicians, who now see the platform only as a tool for fraudsters.


It looks like US government officials will have to answer for their actions. It is especially good to know here that a court can uphold any decision and issue an independent verdict. So in this case it will all depend on the activism of the plaintiffs' side - and Coinbase employees included.


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