A group of Tornado Cash users filed a lawsuit against the U.S. Department of Treasury, calling its sanctioning of the Ethereum mixing service an "unprecedented, overbroad action."
The suit, which is being funded by Coinbase and includes several employees as plaintiffs, also names Treasury Secretary Janet Yellen and Director of the Office of Foreign Assets Control (OFAC) Andrea Gacki.
A month ago, OFAC added Tornado Cash to its Specially Designated Nationals and Blocked Persons (SDC) list, thereby sanctioning crypto wallets associated with the mixing service.
Tornado Cash has been billed as a privacy service that allows people to transact anonymously on the otherwise public Ethereum blockchain. Transactions processed through Tornado Cash are still public but mixed with those of other users to make it difficult to identify individual senders or receivers.
The main driver behind the sanctions, according to the OFAC announcement, was evidence that North Korean state-sponsored hackers Lazarus Group used the service to launder $96 million after stealing funds from Harmony Bridge in June.
That rationale is far too broad, Coinbase CEO Brian Armstrong wrote in a blog post about the lawsuit.
"Sanctioning open source software is like permanently shutting down a highway because robbers used it to flee a crime scene," Coinbase CEO Brian Armstrong wrote in a blog post about the lawsuit. "It's not the best way to solve a problem. It ends up punishing people who did nothing wrong and results in people having less privacy and security."
In the post, Armstrong also described the ways some of the lawsuit's plaintiffs have used Tornado Cash. At least two of them have funds in the mixer that they can no longer access.
One person used it to donate money to Ukraine, which they believe made their crypto wallet the target of malicious airdrops. Using the mixing service kept their identity hidden and provided extra security, wrote Armstrong. Another plaintiff uses it to keep their transactions from being linked to their well-known Twitter profile.
Jonathan Van Loon, one of the plaintiffs and an Ethereum core developer at Prysmatic Labs, wrote on Twitter that it wasn't an easy decision to join the lawsuit.
"Code is speech and free speech is a constitutional right worth protecting," he said.
Neither the Treasury Department nor Coinbase immediately responded to a request for comment from Decrypt.