A federal court has ruled in favor of the US Treasury Department’s right to impose sanctions on the cryptocurrency mixer Tornado Cash. The ruling by U.S. District Judge Robert Pitman came in response to a lawsuit filed by six users against the OFAC (Office of Foreign Assets Control) for accusing Tornado Cash of laundering more than $7 billion of cryptocurrencies since its inception in 2019.
The plaintiffs, which included two Coinbase employees, argued that the government’s actions were unlawful and violated the First Amendment. However, Pitman disagreed, asserting that the users “have not shown that the government’s action in any way implicates the First Amendment.” In a statement to CoinDesk, a Treasury spokesperson said the department is “pleased” with the court’s opinion, and added that it is “critical” to continue disrupting North Korea’s ability to generate revenue for its weapons of mass destruction programs.
The sanction against Tornado Cash comes at a time when money moving to crypto mixers from addresses associated with illicit activities is on the rise. As per a report by Chainalysis, 23% of funds sent to mixers in 2022 have come from illicit addresses, up from 12% in 2021. This has prompted government agencies to take action against non-compliant mixers or impose more sanctions. For example, the UK’s National Crime Agency (NCA) called for mixers to implement KYC checks and keep track of the audit trails of the tokens that cross their protocols.