Coinbase funds lawsuit against Tornado Cash cryptomixer sanctions

Coinbase announced on Tuesday that it is funding a lawsuit brought by six people in the U.S. against the Department of Treasury's for the sanctions on the Tornado Cash open-source cryptocurrency mixer platform.

The American cryptocurrency exchange feels that the U.S. is exceeding its authority by sanctioning an open source privacy technology rather than bad actors.

"In the Tornado Cash action, OFAC did not target the bad actors or the property controlled by those actors; instead, it took the unprecedented step of sanctioning open source technology — a tool legitimately used by many innocent people even if also by some bad actors," reads the Coinbase announcement.

A cryptocurrency mixer is a privacy platform that allows users to deposit funds and withdraw them from a different crypto address after multiple obscuring bounces between the service's nodes, making tracing back to the source more difficult.

Tornado Cash is an open-source and fully decentralized mixer developed and maintained by many volunteers worldwide.

The U.S. Office of Foreign Assets Control (OFAC) sanctioned the Tornado Cash platform on August 8, after a long period of abuse of the project as a money laundering platform, with hackers using it to mix funds snatched from cryptocurrency exchanges, music services, and blockchain platforms.

Most notably, North Korean hacking group 'Lazarus' used Tornado Cash to launder approximately $455 million stolen from Axie Infinity earlier this year.

However, the sanctions imposed on the platform weren't received positively in the blockchain community, as many people were using Tornado to enhance the anonymity of their Ethereum transactions.

As Coinbase's CEO and co-founder Brian Armstrong writes in a blog post, individuals use Tornado to make anonymous donations, protect their security while transacting, and keep their private affairs away from the public.

The transparent nature of blockchains that empowers auditability and verification makes them intrinsically bad for privacy, Armstrong explains, and Tornado served as a critical complement to preserve users' desire for privacy.

Finally, GitHub's removal of Tornado Cash code from its repositories has spread fear among the open-source project developers and threatens to have "a chilling effect on innovation," warns Armstrong.

The lawsuit was filed in the U.S. District Court of the Western District of Texas by six individuals who had their funds trapped in Tornado Cash due to the sanctions.

The litigation requests the court to reverse the sanctions, allowing users to regain access to their funds and giving the community back a tool that will help to preserve their privacy.