Coinbase Employees and Ethereum Backers Sue US Treasury Over Tornado Cash Sanctions (fortune.com) 43
Six users of Tornado Cash, a popular decentralized cryptocurrency service, filed a lawsuit on Thursday against the U.S. Treasury Department, Secretary Janet Yellen, and other officials over their decision to slap sanctions on the service in August. From a report: The outcome of the case, which turns on the novel legal question of whether the U.S. government can impose sanctions on publicly-available software code, is likely to have implications for the crypto industry for years to come. In a 20-page complaint filed in federal court in Texas, the users claim the decision to sanction Tornado Cash exceeded the government's authority, and violated their free speech and property rights under the U.S. Constitution, and "threatens the ability of law-abiding Americans to engage freely and privately in financial transactions."
In recent years, Tornado Cash has emerged as a popular tool for those wishing to hide their crypto transactions. Using smart contracts on the Ethereum blockchain, it allows users to deposit crypto into a pool alongside other users and then distribute it to third-party wallets -- the process makes it highly difficult to determine who gave funds to a given wallet. The plaintiffs in the case include Preston Van Loon, a prominent figure in the Ethereum community who claims he cannot access thousands of dollars worth of Ethereum deposited with Tornado Cash, and his brother, Joseph, who says he intended to use the service to privately fund an Ethereum node and staking service but can no longer do so because of the sanctions. The plaintiffs also include Tyler Almeida, a California security analyst at Coinbase, who alleges that he used Tornado Cash to make anonymous donations to support Ukraine. Almeida claims the U.S. placing sanctions on the service impedes his right to donate -- and by extension his right to express himself under the First Amendment. Almeida is one of two Coinbase employees to put their name on the lawsuit. The company, whose CEO Brian Armstrong has vocally objected to the sanctions on Tornado Cash, is paying the legal bills of the employees and four other plaintiffs.
In recent years, Tornado Cash has emerged as a popular tool for those wishing to hide their crypto transactions. Using smart contracts on the Ethereum blockchain, it allows users to deposit crypto into a pool alongside other users and then distribute it to third-party wallets -- the process makes it highly difficult to determine who gave funds to a given wallet. The plaintiffs in the case include Preston Van Loon, a prominent figure in the Ethereum community who claims he cannot access thousands of dollars worth of Ethereum deposited with Tornado Cash, and his brother, Joseph, who says he intended to use the service to privately fund an Ethereum node and staking service but can no longer do so because of the sanctions. The plaintiffs also include Tyler Almeida, a California security analyst at Coinbase, who alleges that he used Tornado Cash to make anonymous donations to support Ukraine. Almeida claims the U.S. placing sanctions on the service impedes his right to donate -- and by extension his right to express himself under the First Amendment. Almeida is one of two Coinbase employees to put their name on the lawsuit. The company, whose CEO Brian Armstrong has vocally objected to the sanctions on Tornado Cash, is paying the legal bills of the employees and four other plaintiffs.
Oh boy.. (Score:1)
They really didn't think this through.
If they get a judgement against them they just created a legal precedent that can fuck over pretty much all crypto "currencies" and their exchanges.
Not smart.
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Gov't position is that this is money laundering.
Cryptobro's position is that this is free speech.
Nowadays bootlegging would have been free speech and the mafia a private religion. RICO would have been eviscerated by the current SCOTUS.
that may be an legal question for criminal court! (Score:3)
that may be an legal question for criminal court!
and Tornado Cash may be acting like an bank but not reporting under the law about things.
also tax evasion and money laundering can get you some hard time.
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Well, RICO *should* be eviscerated. That was addressing a real problem in a vile and immoral way. Among other things, it's been used abusively to deny people the right to defend themselves in a court of law.
Scammers usually aren't smart (Score:2)
In any case this will be laughed out of the courts. We've been sanctioning software since I think the seventies. Hell a historian could probably find something further back than that
Re:Oh boy.. (Score:4, Insightful)
until it winds its way up to at least a court of appeals that will not really be an issue.
The problem with this line of thinking about avoiding creation of precedent is the issue remains on the table. The issue will end up in court eventually and likely has just as much chance of going the wrong way - but at a later time when you personal have a lot more invested in it.
The only things that should really factor in the decision to force a trial around an open legal question are really
1) After some legal analysis are you really likely to win?
2) Within the question domain is what you have specifically at issue among the more uncomplicated and sympathetic situations?
3) Do you have the wherewithal to retain the best council and experts to argue the case well
The final consideration is maybe possibly the court will give some deference to common practice - IE if everyone is doing it already they might decline to upend the status quo even if the legal arguments in its favor are weak, but I think looking over history that is pretty dangerous thing to count on.
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I notice that you left out all consideration of whether the activity is ethical, or whether you feel, or know that you should feel, ashamed of engaging in it.
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Oh noes. That's much worse than the current precident that the government can sanction a crypto currency at will.
Wait, no it isn't. It's the same.
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If they get a judgement against them they just created a legal precedent
So, about that... the Supreme Court just threw the whole precedent thing out the window
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If they get a judgement against them they just created a legal precedent
So, about that... the Supreme Court just threw the whole precedent thing out the window
You can argue about whether or not the court's decision was legally sound or not, or whether it amounts to judicial overreach, or whether you think the results of it are desirable from a societal rather than legal perspective, but this idea that the court reversing itself is somehow unprecedented (pun intended) is ridiculous. Dobbs is by no means the first time the court has reversed itself, and it will not be the last. In a world where the court cannot overrule itself, decisions like Brown v. Board of Ed
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I'll grant that it's not the first time, but each time they do is, they weaken the argument that precedent is important. I'll agree that this should have been left to the states, but I don't think that that is an important enough consideration to justify overruling the prior decision.
OTOH, if this is to be left to the states, there are many other things that should similarly be left to the states.
Unfortunately, I tend to be a narrow constructionist. I also acknowledge that the current constitution will no
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If they get a judgement against them they just created a legal precedent So, about that... the Supreme Court just threw the whole precedent thing out the window
Hello, traveler from the 1810s [congress.gov], you're in for a big shock.
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Not smart.
Well, it is crypto-"currency" people...
Sounds like money laundering (Score:2)
Re:Sounds like money laundering (Score:4, Insightful)
Which way is that? I suspect they really just want to keep the story in the press to use in their marketing materials to help fleece more foolish people out of their jurassic "fiat currency". :)
I hope they get back every cent... (Score:1)
... that they deserve to get back from all the stupid Ponzi schemes they spaffed their cash into.
Maybe Crypto Bros shouldn't be so susceptible (Score:3, Interesting)
Has anyone thought "Maybe I shouldn't invest in this crypto scam" yet?
The bigger problem (Score:3)
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Tornado is not an exchange or anything like an exchange. The US government doesn't like Tornado because it makes transactions anonymous, not because anybody has or will lose money with it.
The assets you get out of Tornado are always the same as the assets you put in. All it does is to make in impossible to link a withdrawal with any specific corresponding deposit. The money is held on-chain in the smart contract, and there is no way to "rug pull", "exit scam", "take the money and run" or whatever.
There are
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Postage stamps? (Score:3)
"Can 't print-yo-own postage stamps either, eh Bosco?"
I think you can print your own non-sanctioned postage stamps in the U.S., so long as they are for use on a non-USPS carrier. After all, a shipping label can be considered a glorified postage stamp. What you can't do is counterfeit ones for the USPS. After all, that's an obligation to that organization, just as a dollar is supposed to ultimately be an obligation for the US government.
To be clear: I'm no cryto-boi (Score:1)
...I tend to believe the harder someone leans into crypto, the more they have to hide.
Therefore, I expect the plaintiffs here are basically deeply scuzzy people with shitty reasons for wanting to hide their wealth.
THAT SAID....I agree with the suit.
The free market coming up with something too dynamic and quick for the sclerotic US government regulators to react to doesn't ipso-facto give the government a right to slap sanctions on the people/institutions involved.
The US gov't can certainly legitimately WITH
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Money laundering is quite an old concept. Laws against it are firmly established.
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So they should be applied here, right?
I'm pretty sure you have to prove money-laundering then, not just have Emperor Joe wave his hand and j'accuse.
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Lots of crypto people are just (a) paranoid or (b) ideologically opposed to fiat money or (c) speculators.
No need for scuzzy motives. (Of course there is some of that, too; but I think it's a smallish minority.)
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It may be a smallish minority, but judging by the news it's that minority that tends to be running things. And it considers the others to be delicious.
How are the lawyers paid? (Score:3)
BTW how the Criminal Executive Officer paid? And rest of the C[A-Z]Os of the company?
It will take years to reach a final verdict (Score:2)
Helping North Korean groups can get them DEATH pen (Score:2, Insightful)
Helping North Korean groups can get them an max of the death penalty under an court-martial.
aiding the enemy
treason
and more
I don't think the 1st covers that.
Yes civilians, in some circumstances, may be subjected to court-martial.
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The constitution rather carefully defines treason. This doesn't qualify.
I'm not sure that it counts as "aiding the enemy", either, as I don't think North Korea is officially an enemy.
I'm thinking it's going to be much more like tax evasion, fraud, conspiracy to commit tax evasion, conspiracy to commit fraud, and probably a few things about trading with a sanctioned country, but those will be basically add-ons.
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The courts require (Score:2)
In other words, the second that the crypto bros and de-fi zealots step into court, all of their BS, hot air and fuzzy claims will get punctured. It doe
Good luck with that. (Score:3)
This is no different than putting your money into the trunk of a strangers car and then finding your money is forfeit because that car was also transporting illegal drugs and guns. Well, tough shit.
Stop using Bitcoin (Score:1)