The court dismisses Coin Center’s Tornado Cash lawsuit against the U.S. Treasury Department

A U.S. court has dismissed Coin Center’s lawsuit against the U.S. Treasury Department, in which the crypto advocacy group alleged that the Treasury Department exceeded its legal authority by penalizing Tornado Cash — a move it said would infringe the privacy rights of many Americans.

As reported in the brief, Coin Center ruled that the Office of Foreign Assets Control (OFAC) designation of Tornado Cash violated the First Amendment, which protects the right of association. Coin Center claimed that the sanctions blocked a financial privacy tool it relied on to make donations to organizations and charities, and were not specifically tailored to achieve its objectives.

However, the court found that the First Amendment was not violated by OFAC’s designation of Tornado Cash. The court further stated that even if that were the case, the designation met the required level of investigation.

The judgement

The most important points from the ruling are:

• OFAC did not exceed its legal authority under the International Emergency Economic Powers Act (IEEPA) in designating Tornado Cash’s core software tool because foreigners (the founders, developers and DAO) have a financial “interest” in its increased use and popularity from Tornado Cash. As a whole.
• The designation was not random and capricious because there is evidence that Tornado Cash laundered money for North Korea. The designation is consistent with U.S. sanctions policy, and OFAC took into account dependency interests and potential losses through its licensing system.
• The designation did not violate the First Amendment because there is no right to use a particular financial instrument for donations, and it did not compel donor disclosure or prevent anonymous donations.
• The court granted summary judgment for the government defendants and denied judgment for the plaintiffs, thereby dismissing the case.

The court noted that the plaintiffs have not cited any authority supporting the existence of a First Amendment right to use a particular service or type of currency to make donations for charitable or other purposes. Importantly, unlike previous freedom of association cases cited by plaintiffs, Tornado Cash’s designation did not force private associations to disclose anything about their donors or members.

According to an August 2022 press release from the Treasury Department, Tornado Cash was sanctioned for its role in laundering more than $7 billion in virtual currencies since its founding in 2019, including more than $455 million stolen by the Lazarus Group, a the North Korean state-sponsored hacker. group.

Coin Center Communications Director Neeraj Agrawal tweeted in response to the statement: “Disappointing. We plan to appeal.”