Coinbase Foots Bill For Lawsuit Against US Treasury Over Tornado Cash Sanctions: 'Saw This As Much Larger Problem'

Cryptocurrency exchange Coinbase Global Inc COIN is funding a lawsuit against the U.S. Treasury Department for its sanctions against coin mixer Tornado Cash TORN/USD, as per a report from CNBC.

What Happened: The lawsuit was filed by six plaintiffs, including Coinbase employees, and argues that the sanctions against the decentralized privacy protocol were an overstep by the Treasury’s Office of Foreign Assets Control (OFAC) and asks that the platform's smart contracts be removed from the sanctions list.

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“We saw this as a much larger problem. It sets a dangerous precedent — if this code can be designated without any limits imposed by law, any technology any tool or system could be fair game,” Coinbase’s chief legal officer, Paul Grewal, told CNBC.

In August, the U.S. Treasury sanctioned the Ethereum-based ETH/USD coin mixer for its alleged role in helping hackers launder stolen cryptocurrency. The OFAC claimed the service was used to launder over $7 billion worth of digital assets, of which $455 million was laundered by the North-Korean backed Lazarus Group of hackers.

Grewal likened the sanctioning of Tornado Cash to the police banning all use of a highway while chasing armed robbers on it. He said that Coinbase intends to pay for the plaintiffs' lawyers and other legal costs.  

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Price Action: Coinbase shares traded 0.082% lower after-hours, as per data from Benzinga Pro. ETH was trading at $1,634 at press time, down 0.93% over 24 hours. TORN, the native token of Tornado Cash, was trading at $9.58, up 17% over the same period.