A group of crypto market participants arguing for the popular crypto mixer Tornado Cash recently lost a lawsuit against the United States Department of Treasury. The group consisted of crypto developers and investors and was backed by California-based crypto exchange Coinbase, which provided funding for their legal efforts.
According to an order passed by Judge Robert Pitman of the U.S. District Court for the Western District of Texas, Tornado Cash was found to be an entity in itself, which had a property interest in its smart contracts. The crypto group argued in its initial complaint that the crypto mixer could not be designated an actual entity.
Tornado Cash was launched in 2021 as an open-source cryptocurrency tumbler that was decentralized and non-custodial. The crypto mixer was built on Ethereum and enhanced user privacy by allowing users to deposit their ERC-20 assets and withdraw using a new address. This ensured privacy by obscuring the link between the original and the final crypto address.
Tornado Cash quickly gained popularity in the crypto community as it proved useful for crypto traders and investors that revered decentralization and privacy, the cornerstones of cryptocurrencies. However, the mixer was also misused by bad actors to hide the illicit gains by mixing their crypto assets. This included exploiters, rug pullers, hackers, etc. though the vast majority of the mixer’s users were genuine.
The Office of Foreign Asset Control (OFAC) of the U.S. Department of Treasury sanctioned Tornado Cash in August last year, accusing it of facilitating money laundering for malicious entities. This included North Korea’s notorious hacker outfit, Lazarus Group, which reportedly exploited Axie Infinity to the tune of $620 million in July 2022.
A group of crypto stakeholders sued the Treasury Department in September 2022, accusing it of overstepping its authority in blacklisting Tornado Cash. Coinbase publicly supported the legal campaign mounted by the group, lauding them for defending privacy in the crypto ecosystem.
