They lost money when Tornado Cash got banned. Now Coinbase is helping them sue the government

Basic Takeaways

  • Coinbase is funding a lawsuit against the US Treasury over its decision to sanction Tornado Cash.
  • The exchange’s CEO Ben Armstrong wrote in a blog post that the Treasury Department had “overstepped its authority” and was harming law-abiding US citizens.
  • The lawsuit is being filed by six people who previously used Tornado Cash for legitimate purposes.

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Six people who used Tornado Cash for legitimate reasons had their funds frozen after the protocol was validated by the US Treasury Department. Now they are filing a lawsuit and Coinbase is funding them.

Coinbase Funds Sues Tornado Cash Ban

Coinbase Leads Crypto Community’s Fight Against US Treasury Tornado Cash Sanctions.

The leading US cryptocurrency exchange published a memo written by CEO Ben Armstrong on Thursday saying it would fund a lawsuit brought by six people challenging the Treasury Department’s decision to blacklist Tornado Cash.

Armstrong argued that the Treasury Department had “exceeded its authority” granted to it by Congress when it chose to sanction a piece of open-source software and that it had ignored legitimate use cases for the technology.

The Ministry of Finance added the popular privacy protocol Tornado Cash on its sanctions list on August 8 citing its popularity among cybercriminals such as the Lazarus Group. He claimed it had become a vehicle for money laundering and accused the group of failing to prevent illegal activity. The decision had wide-ranging implications for the crypto space and was met with community-wide outcry. Several entities like Circle and Infura immediately blacklisted Ethereum addresses that had interacted with the protocol and many prominent figures in the industry spoke out against the ban. Tornado Cash developer Alexey Pertsev was then arrested in Amsterdam by the Dutch Financial Intelligence and Investigation Agency on August 10. he is still in prison even though he has not been formally charged.

In his letter, Armstrong highlighted three cases of people using Tornado Cash for legitimate purposes before the ban. Someone had used it to donate anonymous money to Ukraine (which Vitalik Buterin separately admitted to following the ban). Another with a large online presence used the protocol to avoid being targeted by cybercriminals. Another used it to protect his Ethereum staking business. All three have frozen their funds due to the sanctions. make up half of the plaintiffs in the Coinbase bankrolling lawsuit.

Armstrong likened the Treasury Department’s decision to “permanently closing a highway because robbers were using it to get away from the scene of a crime,” arguing that the decision punished innocent people. He added that it would have a stifling effect on innovation, as open source developers would live in fear of being held responsible for something they have no control over.

Disclaimer: At the time of writing, the author of this piece owned ETH and many other cryptocurrencies.

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