Investors Challenge OFAC’s Tornado Cash Sanctions: Coinbase

  • Coinbase’s lawyer, Paul Grewal, tweeted that the plaintiffs’ arguments are simple but powerful.
  • The lawyer explained the arguments stating that the claims raised by the government are not applicable to Tornado Cash.

Paul Grewal, the Chief Legal Officer at Coinbase, shared a series of Twitter threads explaining the Coinbase-backed plaintiff’s submission of the motion for a partial judgment summary in the Texas District Court. The motion intended to ask the government to take off the ban on the fully decentralized cryptocurrency tumbler Tornado Cash (TC), making it “open” to all.

Previously, following the restrictions on Tornado Cash, prohibiting individuals and entities from using the platform or the Ethereum wallets connected to the protocol, six plaintiffs including Coinbase employees sued the US Department of Treasury alleging that the department’s move is “not in accordance with the law.”

On April 5, the plaintiffs filed a motion legally challenging the sanctions imposed by the US Office of Foreign Asset Control (OFAC) against TC. Notably, following the submission, the Coinbase lawyer tweeted commenting that the plaintiffs’ “arguments are simple but powerful.”

Notably, as mentioned in Grewal’s tweet, the plaintiffs argued that the government’s claim against TC is not applicable as the provision allows the pursuit of property-related action against a foreign “national” or “person”; TC is an open source software.

Interestingly, Grewal moved on to explaining the plaintiff’s argument, illustrating with the example of how TC’s smart cards cannot be considered property, as they aren’t “owned at all”. He stated:

Even if an ownerless thing could somehow be property, these 20 smart contracts aren’t owned at all – not by any foreign national or sanctioned person, and certainly not by people who happen to have a certain crypto token in their wallets.

Further, he added pointing out the next argument, that the government’s sanctions violate the First Amendment, restricting thousands of “law-abiding American citizens” from using the services of TC.

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