Free speech at stake in challenge to US tornado cash sanctions by lawyers

A group of crypto engineers and investors is suing the U.S. Department of Treasury over sanctions placed on the Tornado Cash protocol. The lawsuit raises questions about whether smart contracts are property, whether holders of a protocol’s token are members of an unincorporated association, and whether banning open-source software is an attack on free speech. The plaintiffs argue that the sanctions violate the International Emergency Economic Powers Act (IEEPA) by failing to properly identify a foreign “national” and “property” related to Tornado Cash, and by not demonstrating a sanctionable interest in immutable, open-source smart contracts. They also argue that the Treasury’s definition of Tornado Cash as an unincorporated association does not meet the test for such an association. The defendants claim that the Treasury’s actions would infringe on the First Amendment due to its broad nature. While Tornado Cash is typically associated with hackers trying to obfuscate their gains, law enforcement experts caution that this does not necessarily make it complicit in money laundering. The plaintiffs argue that the evidence of Tornado Cash being a tool for money laundering is weak, noting that the Treasury has only provided three examples out of millions of transactions. Meanwhile, in the Netherlands, Tornado Cash developer Alexey Pertsev is facing a trial over money laundering allegations and has won the right to cross-examine blockchain analytics company Chainalysis. Tornado Cash’s DAO was recently the victim of a vote fraud attack, and the attacker has started to move their proceeds via Tornado Cash. Edited by Sandali Handagama.

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