The US Treasury Department is facing a second lawsuit after its decision in August to sanction Tornado Cash, a crypto-mixing service that conceals the sources of coin transactions.
The lawsuit filed Wednesday in the U.S. District Court for the Northern District of Florida asserts the Treasury’s sanctions misused its power and targeted US cryptocurrency investors.
A crypto advocacy group, Coin Center, and a host of the popular industry podcast Bankless, who relied on Tornado Cash for regular privacy issues, named the 78th United States secretary of the treasury, Janet Yellen, as one of the defendants in their lawsuit.
“The Administration’s use of the foreign-affairs power to punish domestic cryptocurrency users was unprecedented and unlawful,” the lawsuit reads, referring to the sanctions imposed by the Office of Foreign Asset Control (OFAC).
Earlier this year in August, the Treasury’s Office of Foreign Assets Control accused Tornado of laundering more than $7 billion of cryptocurrencies since its establishment in 2019, including some virtual currencies siphoned by a North Korea-sponsored hacking group.
Moreover, the governing agency imposed a ban on crypto wallets linked with Tornado Cash, in addition to a related piece of code known as smart contracts, a type of computer program that automatically executes transactions.
Tornado Cash is a coin mixing service on the Ethereum (ETH) network created to enhance the privacy of customers. The service was banned by OFAC in August, with the government agency claiming North Korean hackers had laundered hundreds of millions of dollars using the service.
Last month, the US Treasury Department clarified that the sanctions do not restrict users in the US from viewing and distributing the open-source Tornado Cash code.
The lawsuit claimed that there are valid reasons for customers to utilize privacy-enhancing technologies such as Tornado Cash. As a result of OFAC’s sanctions against the privacy mixer these individuals now essentially disclose their complete transaction history to anybody who is looking at the network data.
“An order effectively requiring Defendants to decriminalize the use of the 20 Tornado Cash addresses would allow Plaintiffs to conduct their legitimate activities with some measure of anonymity, use their preferred software tool without fear of penalties, and engage in important expressive associations,” the suit added.