There is a new legal challenge to the lawsuit originally filed in September 2022 alleging that the U.S. Treasury Department’s decision to ban Tornado Cash is “not in accordance with the law.” The Coinbase-backed plaintiffs have filed a motion for partial summary judgment that, if granted, will resolve some of the factual issues while leaving others for trial.
A motion for partial summary judgment was filed in Texas District Court on April 5. The plaintiffs, who are supported by Coinbase, are seeking a settlement with the U.S. Office of Foreign Asset Control (OFAC) on the first two counts of their original lawsuit.
The plaintiffs claim OFAC exceeded its statutory powers under the International Emergency Economic Powers Act (IEEPA) and violated the First Amendment.
The motion then adds that OFAC violated a section of IEEPA that authorizes the Treasury to take action against property associated with a foreign country or a foreign national. Because this provision only authorizes the pursuit of property actions against a foreign “national” or “person,” it doesn’t extend to open-source software.
To restore the right to privacy on the Internet, the plaintiffs also added that 20 other smart contracts with the same functions as Tornado Cash shouldn’t be considered property under IEEPA because they aren’t possessory:
An immutable smart contract is incapable of being owned, it is not property and the Department lacks authority under IEEPA and the North Korea Act to prohibit transactions with those smart contracts.
In addition, the plaintiffs said that even if OFAC is able to take action against North Korea’s Lazarus Group, a complete ban on open-source software like Tornado Cash is too severe. After all, in 2021, money laundering accounted for only 0.05% of all cryptocurrency transactions.
They compared the complete ban of Tornado Cash to the ban of the printing press because a small number of users could find instructions on how to build a nuclear weapon.
Meanwhile, Tornado Cash developer Alexey Pertsev has been held in custody since August 18, 2022.
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