Coinbase is Funding Lawsuit Against US Treasury For Sanctioning Tornado Cash

Coinbase exchange

September 9, 2022

Reading Time: 2 minutes

The US Treasury Department announced the sanctions on crypto mixing tool, Tornado Cash in August following an allegation that the tool is being used for illicit activities related to money.

However, the US Treasury ban on the mixing tool doesn’t sit well with some users of Tornado Cash including the US largest cryptocurrency exchange as many argued that the sanction will have a ripple effect on the tech industry.

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Coinbase Bankrolling Lawsuit Against US Treasury 

About six users of Tornado Cash including some Coinbase staff have challenged the US Treasury Department’s sanction of Tornado Cash in court, a filing that is being backed by Armstrong’s Coinbase.

Crypto mixers like Tornado Cash are usually used in the crypto space to obfuscate transactions, the Treasury Department in August however announced the ban on Tornado Cash as it claimed that it is used by scammers to launder money.

Meanwhile, the mixing tool is used by traders legitimately for privacy reasons, one of such case is the use of the tool by a senior security risk analyst at Coinbase who claimed that he has used the mixing tool to donate funds to help in the Ukraine humanitarian crisis which he had to use mixing tool to prevent his address to be targeted by Russian hackers, another plaintiff is concerned about the security of his family.

“Each is an American who simply wants to engage in entirely lawful activity in private,” according to the lawsuit.

The plaintiffs claimed that the US Treasury sanction on the crypto mixer is a step beyond its authority, the plaintiffs in the lawsuit also argued that their money is being locked in the mixing tool and resultant caused them financial harm.

“We saw this as a much larger problem, It sets a dangerous precedent — if this code can be designated without any limits imposed by law, any technology, any tool or system could be fair game,” said Paul Grewal, Coinbase’s chief legal officer in an interview with CBNC.

Grewal furthered that the Tornado Cash ban may have a significant effect on innovation, he compared Tornado Cash to security chasing arm robbers on the highway, according to Grewal, we can not ban all use of highways just because we want to catch criminals, he also said that this will be the first time Coinbase has supported external lawsuit financially.

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