A U.S. federal court has dismissed an appeal by several Tornado Cash users seeking to lift sanctions against cryptocurrency mixers.
“The court found that Tornado Cash is an entity within the ordinary meaning of the term and therefore an entity that may be designated pursuant to OFAC regulations,” the application reads.
Disagreement on how tornado cash is defined
In a court filing on August 18, U.S. District Judge Robert Pittman ruled that the fine against cryptocurrency mixer Tornado Cash is valid.he has was denied 6 user requests to lift sanctions against Tornado Cash.
The lawsuit is a response to tough sanctions imposed on Tornado Cash by US authorities last year.
In August 2022, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added Tornado Cash to its Specially Designated Nationals and Blocked Persons (SDN) list.
In light of the numerous allegations that Mixer is involved in money laundering, the sanctions now require Tornado Cash to report to OFAC all property in the United States or owned by U.S. citizens.
However, six Tornado-using plaintiffs believe there is confusion about what Tornado Cash actually is.
“The parties disagree on how to characterize Tornado Cash. Plaintiffs allege that Tornado Cash is a decentralized entity consisting of a subset of smart contracts, or “pools,” on the Ethereum blockchain. It claims to be a type open source software project.
Six users claim the decision is beyond the ministry’s authority. They argue that it violates jurisdiction and the Free Speech Clause.
Users claim that Tornado Cash is different from other mixing services because it is autonomous software.
“Their users rely on immutable, autonomous, self-executing smart contracts,” plaintiffs argue.
Meanwhile, the Ministry of Finance characterizes Tornado Cash as “an entity that operates cryptocurrency hybrid services.”
Sanctions imposed due to alleged money laundering
The Department’s Office of Foreign Assets Control has sanctioned Tornado Cash for allowing $7 billion in illicit financial flows since 2019.
The Treasury Department claimed that a North Korean hacking group called the Lazarus Group funneled more than $455 million in stolen funds through Tornado Cash.
It is also claimed that the June 2022 Horizon Bridge attack resulted in a loss of approximately $100 million and that the Nomad robbery was laundered through Tornado Cash.
This sanction significantly reduced Tornado Cash activity. With the sanctions coming into effect, the number of monthly users decreased by 50% from July 2022 to August 2022.
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