Crypto investors and developers have lost a lawsuit funded by Coinbase that sought to challenge the US Treasury Department’s decision to sanction Tornado Cash, a mixing service designed to make crypto transactions anonymous. Judge Robert Pitman from the US District Court for the Western District of Texas found that the Treasury Department had designated an entity, which includes the decentralized autonomous organization (DAO) that governs the mixer. The DAO is an entity unto itself that, through its voting members, has demonstrated an agreement to a common purpose, he wrote. The judge also rejected other arguments from the plaintiffs, including one which said Tornado Cash doesn’t have a property right in the actual smart contracts being designated and an argument that the sanctions violated the First Amendment.
The Treasury Department’s Office of Foreign Asset Control (OFAC) sanctioned Tornado Cash last year, alleging it was a key tool used by malicious actors like North Korea’s Lazarus Group to launder crypto funds stolen from decentralized exchanges and games like Axie Infinity. Coinbase Chief Legal Officer Paul Grewal said on X, formerly known as Twitter, that the company would support an appeal.