Coinbase bankrolls lawsuit against Treasury Department following Tornado Cash sanctions.
A lawsuit filed against the Treasury Department by users of the recently sanctioned crypto service, Tornado Cash, is being funded by Coinbase. Among the six plaintiffs are Coinbase employees and other users of the mixing service that was blacklisted by the Treasury Department’s Office of Foreign Assets Control in August. Mixing services such as Tornado Cash are used to obfuscate crypto transactions, which are anonymous but easily traceable. The Treasury Department argued that North Korean hackers and other bad actors had used this service to launder more than $7 billion in digital currency over the past three years. But in some cases, mixing services are used for legitimate privacy reasons. One plaintiff, a senior security risk analyst at Coinbase, used the service to anonymize donations to Ukraine out of fear that Russian hacking groups would target his address. Another had concerns about his family’s security. “Each is an American who simply wants to engage in entirely lawful activity in private,” according to the lawsuit.
The sanctions were a unique move by Treasury to blacklist open source software versus an entity or person. Crypto enthusiasts have argued that the move was an overstep, set a new legal precedent, and could cause negative ripple effects for the tech industry. “We saw this as a much larger problem,” Coinbase’s chief legal officer, Paul Grewal, told CNBC. “It sets a dangerous precedent — if this code can be designated without any limits imposed by law, any technology any tool or system could be fair game.” The former deputy general counsel at Facebook, Grewal, warned that this could have a chilling effect on innovation.