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Investors sue Treasury Department for blacklisting crypto platform Tornado Cash

227 points by CapitalistCartr 4y ago

I_cape_runts 4y ago
I take this as an endorsement that it works.
AntonyGarand 4y ago
https://archive.ph/ZIWNt https://archive.ph/ZIWNt
mikece 4y ago
Banning a service because it "might be used for illegal purposes" is insufficient. This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. I would rather money-launderers get away with things and for freedom to prosper than to have an all-encompassing surveillance state.
- cguess 4y ago
  It was used for tumbling, to the tune of $450m by the North Koreans. It's not a theoretical situation.
  - mikece 4y ago
    And yet, somehow, we knew exactly who was doing it. Why the urgency to shut it down?
    - belval 4y ago
    - nh23423fefe 4y ago
      You could just read what treasury wrote and argue with facts instead of vague rhetoric about lazy law enforcement > “Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.” https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
      - DennisP 4y ago
        There are two Tornado Cash entities: one is made of people, and the other is autonomous code running on chain. The OFAC action confuses those two, and it's not clear they have the authority to sanction code. For much more on this, see the legal analysis by Coincenter: https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-entity-in-the-tornado-cash-case/ https://www.coincenter.org/analysis-what-is-and-what-is-not-... Note that FinCEN does pay attention to this sort of distinction, and says that software providers are not subject to money laundering regulation.
    - wil421 4y ago
      Why should North Korea be allowed to steal and hack from other country’s people and organizations? It should be shut down immediately. I feel like your trying to say NK and Tornado should be able to do illegal activities that harm people. Just because you don’t like the police or something.
      - mikece 4y ago
        The very fact (or assumed fact) that we know North Korea is using this undercuts the argument that we need to shut this down because it allows for anonymous money laundering. (By definition: the only way money laundering can be "dangerous" is if it cannot be detected or the players identified.)
        yunohn 4y ago
        No, in this, the authorities had the time/money to track down the hackers. The vast majority of tornado transactions are mostly illegal, but nobody cares enough to spend their efforts on them.
        x86x87 4y ago
        What a world we are living in. Mostly illegal. Huh. Do you have any data to back this claim? Also, should banks be banned if their customers are doind shady things outside of using their services?
        polygamous_bat 4y ago
        If it's a mafioso bank used mostly by the mafia, then yes, absolutely, they should be investigated and shut down. As for data, just as a first-order estimate, check out the rekt leaderboard [1] and see how many of the stories end with "and the stolen funds were routed through tornado, fin." If all crypto-adjacent crimes are reported to FBI at some point I am sure they have a much clearer statistics, but even as a civilian you can see that it's not small. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
    - giaour 4y ago
      I don’t follow your logic. Isn’t the whole point of mixers that everyone can see dirty money go in, then the forensic trail stops?
    - amalcon 4y ago
      Let's suppose you have Bob's Traditional Bank. They keep meticulous records, and comply with US government requests for them (regardless of what you think of such practices, let's just say that this particular bank happens to do those things). They also facilitate transactions on behalf of North Korea. Bob's Traditional Bank would be sanctioned here, because transacting with North Korea in that way is what triggers these sanctions. This is why Tornado is being sanctioned. The privacy thing may or may not be illegal, despite its ineffectiveness, but the transacting with North Korea thing definitely is.
  - ballenf 4y ago
    And what's the value of drugs trafficked over public highways? Or illegal activity coordinated over SMS? Using volume of illegal activity cannot be the primary factor in categorizing a platform.
    - yunohn 4y ago
      You’re right, a crypto mixer primarily used to launder money or evade taxes is *exactly the same* as highways and SMS.
      - lampshades 4y ago
        Closi 4y ago
        Let's imagine for a second that I owned a physical bricks-and-mortar business with a shopfront that took physical cash (USD banknotes), then mixed it up in a big laundry machine with banknotes from other customers, and then I give you back some other banknotes which are totally random (less a fee). Let's also say I don't do any Know Your Customer checks (KYC). Do you think that should be legal (like highways and SMS) or illegal (like money laundering)?
        polygamous_bat 4y ago
        You can literally go through the rekt leaderboard [1] and count how many of the stories end with "and then the funds were routed to tornado cash, fin." It's not exactly a secret, and it doesn't require any specuation. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
        res0nat0r 4y ago
        ? https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
  - sam0x17 4y ago
    If that's the cost of a freer internet that's fine with me. I don't care if it's $10t.
    - x86x87 4y ago
      That's a very limited way of looking at things. You're fine with banning X and Y because you don't see them impacting you. When Z is banned and you care about Z you'll have a rude awakening.
      - nibbleshifter 4y ago
        I think the poster was saying they are fine with that amount if laundry, because its more important for a free internet to exist.
        x86x87 4y ago
        After rereading I agree with you. It wasn't clear to me whem first reading it.
      - npc54321 4y ago
        It's obvious sam0x17 is against blocking anything.
    - deleted 4y ago
      [deleted]
  - whatisweb3 4y ago
    450m is a whopping 6% of all deposits on Tornado Cash[1]. The total percentage of illicit activity on the protocol is reported to be in the 10-30% range[2]. What percentage of activity in an E2EE chat application like Matrix is illicit? If a significant but minority percentage of its use is facilitating criminal discussion, should those open protocols also be sanctioned? [1] https://dune.com/poma/tornado-cash_1 https://dune.com/poma/tornado-cash_1 [2] https://www.eff.org/deeplinks/2022/08/code-speech-and-tornado-cash-mixer https://www.eff.org/deeplinks/2022/08/code-speech-and-tornad...
    - pclmulqdq 4y ago
      This isn't about the fraction of illicit use. A large fraction of Americans with numbered/anonymous Swiss bank accounts did nothing wrong with them - a much larger fraction than tornado cash users. However, they were still banned for US citizens due to US KYC rules. The land of free speech is obsessed with being able to trace money as it travels. No surprise they would go after a service whose explicit purpose is to break the chain of custody on money.
      - bitxbitxbitcoin 4y ago
        Banning the use of Tornado Cash is one thing - I didn’t see any Swiss bankers arrested or prosecuted for money laundering during that move.
        pclmulqdq 4y ago
        You mean like these Swiss bankers? https://www.reuters.com/article/us-usa-switzerland-tax/ex-swiss-banker-goes-home-after-u-s-loses-extradition-from-germany-idUSKBN13Y23N https://www.reuters.com/article/us-usa-switzerland-tax/ex-sw... https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-charges-swiss-lawyer-and-swiss-banker-conspiring-hide-millions https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-c... https://www.justice.gov/opa/pr/former-ubs-banker-charged-helping-us-taxpayers-use-secret-swiss-bank-accounts-evade-us-taxes https://www.justice.gov/opa/pr/former-ubs-banker-charged-hel... This wasn't mainstream news, but neither was the sanctioning of Tornado cash. You just happened to hear about one but not the other.
- jfim 4y ago
  How much of it is used for legitimate reasons versus illicit ones? If the overwhelming majority of the transactions are illicit, it makes sense to ban it.
  - Wowfunhappy 4y ago
    I agree with you, but I'd like to point out that the same logic could be applied to e.g. game console emulators. ...and as much as I hate to say it, I do think the logic might be correct in both situations. (I say this as a heavy user of console emulators—albeit also as someone who does go through the trouble to legally dump his own games.)
    - criddell 4y ago
      I don't know that it's really an apples-to-apples comparison. Console emulators are a copyright issue and those are generally (but not always) civil matters.
    - jfim 4y ago
      It depends on how you see it. One way to look at it is to say "I derived this rule based on what the ratio of licit to illicit usage is, thus it should apply everywhere." From that perspective, then yes, your observation that it would apply to both situations is correct. Another way to look at it is "for this particular scenario, what is the optimal outcome?" If you're running a game console emulator for a system that's not being sold anymore, with games that are not being sold anymore, one could argue that that scenario would be net positive considering the lack of harm; in other words, you get to enjoy the game, while nobody gets hurt, so it's positive overall. The first perspective is called "rule utilitarianism," while the latter is called "act utilitarianism," in case you want to learn more about those.
  - dsr_ 4y ago
    It makes even more sense to allow it, and regulate it. The regulation should be the existing Know Your Customer requirements plus a 100% traceable log subject to inspection, auditing and subpoena.
- deleted 4y ago
  [deleted]
- JustLurking2022 4y ago
  It's a service specifically designed to facilitate money laundering. It's a bit like running a business that produces paperwork to make stolen cars indistinguishable from legal ones - there's no reason such a service should be allowed to exist.
  - junofan 4y ago
    Can’t law enforcement use search warrants in their own jurisdiction?
  - devoutsalsa 4y ago
    So are casinos, banks, money exchanges, and hot dog stands. There are tons of reasons for wanting privacy that have nothing to do with money laundering. Avoiding kidnapping & ransom because someone can’t see the size of your crypto wallet for example.
    - zeusk 4y ago
      You're really saying; banks, money exchanges and hot dog stands have no other utility other than to "wash" money?
      - bitxbitxbitcoin 4y ago
        It’s reductionist but yes - “washing” money is a core part of their function. Note OP didn’t say laundering.
        woodruffw 4y ago
        No, it isn't. Banks exist to induce stability and liquidity (i.e., the efficient flow of capital) within the economy. Hot dog stands exist to sell hot dogs. Money exchanges exist to transfer currencies to (you guessed it) facilitate commerce in different regions. The hair you're attempting to split between "laundering" and "washing" does not exist in the financial world, and would not impress financial regulators.
- speedylight 4y ago
  You could also say that Silk Road was an E-commerce business that might’ve been used to sell drugs, who knows!
  - x86x87 4y ago
    Not one to defend Silk Road, but pause and think about it for a second: it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) People were breaking stupid laws from the 70s established after mass hysteria around drugs by one of the scummies US president ever. More than that, the tax man was not getting its cut. Now to put things in perspective let's compare to some things US agencies have done in the past: https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_trafficking https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_traf...
    - FireBeyond 4y ago
      > it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) Because there was all sorts of white washing like this. "It's drugs, but safer, and without the violence and crime!" If you think that violence, crime are magically gone because of Silk Road, you'd be considered ignorant or naive. Production still happens in the same places, the poverty, corruption and violence-stricken areas. It's just invisible to you now, because you don't have to worry about your dealer stealing from you, getting mugged, or buying from an unknown source, or being arrested. All those people in Mexican and Colombian villages subject to the tyranny of the cartels... oh well. All good then, I suppose.
      - npc54321 4y ago
        > All those people in Mexican and Colombian villages subject Just go into the frigging villages and arrest the cartel leaders oh wait they are in cohort with the governments of those countries...
- Forrest7778 4y ago
  It's not a black and white issue; things aren't getting banned because they might be used for illegal purposes, that is even explicitly stated in the article.
- woodruffw 4y ago
  "Might be used for illegal purposes" is a significant understatement. The chief selling point of Tornado Cash is money laundering, which is in and of itself a crime in both the US and Netherlands. Normally, there'd be an aspect of plausible deniability: torrent index operators can, for example, rightfully claim that they're facilitating legal filesharing, or that they're entirely agnostic to the content being shared (if all they're doing is sharing URLs). What's key in this case is that law enforcement claims that Pertsev was aware of the crimes his service was being used for. Whether or not that's actually true is up to a court to decide.
  - TEP_Kim_Il_Sung 4y ago
    The chief selling point of Tornado Cash is that it's distributed open-source software, with no man in the middle, no single point of failure. That's right: Government sanctioned open-source SOFTWARE. Are you sure you want this precedent set?
    - woodruffw 4y ago
      I have no problem with Tornado Cash being openly available software under a permissive license. I have a problem with people running a Tornado Cash-based service that is really just a money laundering service. You should take a step back: "open source" does not rinse away the underlying properties of a service. I can't write and deploy a web application that contracts hitmen and use the MIT license as a defense; the latter simply isn't being litigated.
      - theplumber 4y ago
        What's the difference between money launderying features and privacy features? Tornado Cash in itself does is not launderying money because you still have to prove to the IRS how you got the money or the asset(i.e bills, invoice etc) and you still have to obey KYC rules. You can't just say the money is from Tornado Cash and be done with it. Is the U.S Mint a money launderying service because it provides an untraceable method (cash) to conduct transactions?
- ouid 4y ago
  You seem to think that freedom means a world in which you are allowed to hide your assets from the government. You have never been allowed to do that. You're going to have to change the law, and because you live in more or less a democracy, you're going to have to convince people that its good to change the law.
  - TEP_Kim_Il_Sung 4y ago
    For the time being the government has yet to decide wether crypto is money, a currency, an asset, or a security. Instead it has been going after people for all of them.
    - qeternity 4y ago
      Because crypto claims to be all 3 and has created various forms that behave like all 3.
      - TEP_Kim_Il_Sung 4y ago
        This would hold up if government treated individual forms individually, yet they mix&match arbitrarily.
  - bruiseralmighty 4y ago
    History did not start in 1913. Income is not an asset, they have been two different things for longer than the United States has existed as a country. Most governments in recorded history have managed to exist without taxing income. It would in fact be better live in a country with financial privacy where assets form the tax base instead of income. In terms of convincing the public, I think time will do the former and education the later.
- marginalia_nu 4y ago
  > This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. The flaw with this line of reasoning is that behaviors have changed. In the past, when the police did "police work", people had no choice but to meet in person to discuss their criminal enterprises. You could follow them, and listen in. Many illicit schemes also left a trail of paper that needed to be stored in physical space. It's not that the police have gotten lazy, it's that if you expect criminals to hang out in a shady dockside speakeasy like they did when Al Capone ran the town, you're simply not going to find anything. This is a real tricky problem to which I'm not sure there are good solutions. There's a mounting conflict of interest upholding the law on the one hand, and the interests of law-abiding citizens on the other.
- jmyeet 4y ago
  You have to remember that access to the US financial system is a privilege not a right. To be granted that privilege, a financial institution has a number of obligations. Thesee include various KYC/AML obligations. So this isn't Tornado Cash "might be used for illegal purposes" so much as it's clear evidence they're failing to meet their legal obligations. There's a larger point here too: as much as proponents tour crypto's extragovernmental status, it would take very little effort by governments to completely cripple any crypto assset in practical terms.
  - bruiseralmighty 4y ago
    So proposing a hypothetical. If the only issue here is obligation to the U.S. financial system what if the only on-off ramps to e-coins were cash only? So as an individual, I convert my cash to e-coins through some e-coin dedicated ATM-like machine. And I can redeem my e-coins for cash at another e-coin-ATM somewhere else (maybe anywhere in the world). Would coin pools like Tornado Cash then be acceptable? It would not be tied in any way to the credit or banking systems, it takes cash only, and then just a basic utility internet connection. Maintenance for the machines and paying the internet utility would just be a fraction of a percentage fee on each transaction. Now all e-coins would simply exist as a privacy themed alternative ecosystem to cash. Since we are not joining the U.S. financial system, these e-coins should not be expected to have any obligations to that system correct?
- 0x_rs 4y ago
  Criminals are most certainly going to get away with it regardless of how many restrictions and surveillance you apply to the little people, as they have the means (capital) to do so. I don't want to stretch it too far, but the current rules seem nearly purposefully pointed towards the least effort category. There's quite a lot of coverage on this matter, some (and a lot in the cryptocurrency scene) like to cite works from Ronald F Pol who has done a lot of heavy handed criticism on AML et cetera (as far as claiming less than one percent of real-world regulations effectiveness), these claims can be disputed, but it's apparent even to mainstream publications most unlawful flows are uninhibited and the approach is ineffective, expensive and dangerous. https://www.economist.com/finance-and-economics/2021/04/12/the-war-against-money-laundering-is-being-lost https://www.economist.com/finance-and-economics/2021/04/12/t... https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_scandal https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...
- croes 4y ago
  Are you sure they are lazy or are they just underfunded and with to few personnel?
  - A4ET8a8uTh0 4y ago
    It probably depends. I live in Chicagoland. Cops here are a lot of things, but I can't honestly say they are underfunded. The pension alone is likely worth the risk ( source: couple cops in my extended family ) even if money is not staggering ( and it still not on the low end by any means ). But to go back to the original query. It is just so much more easier to click couple of buttons than go somewhere and ask questions. It is cheaper too. The convenience trumps most of the other reasons. The same goes for privacy. The convenience killed it.
- Fnoord 4y ago
  If its used for a high percentage of criminal purposes (for example 90%) banning is legitimate. Also, who are these "investors"? They're speculators. When you speculate, there's risk involved. This is one of them. This case is an unnecessary burden on our legal systems, I hope it gets thrown out of court ASAP.
- Sir_Liigmaz 4y ago
  The USA PATRIOT Act requires every financial institution and money service business have an AML department. There are thousands of people in the US that are paid to look at your bank account and decide if you've been naughty or not and narc to the feds if you have. This is happening everyday. We are already living the surveillance state.
- barelysapient 4y ago
  At this point, failure to comply with the statute means a violation of law; regardless if any criminal laws were observably broken or not.
- davidguetta 4y ago
  wait what ? literally the entire point of financial regulations is to avoid it to "possibly be used for illegal purposes". Starting with the very basic KYC regulation, or the fact that in many countries cash transaction above a limit are forbidden. I'm all about privacy and anonymity of transactions personally, but tornado investors going all "surprised pikachu" right now after a more-than-previsible ban is a bit laughable...
- jjtheblunt 4y ago
  > they are lazy ?
- houstonn 4y ago
  A question for those in this thread who want to ban a privacy service because it's utilized for unlawful activity: What's your opinion of Tor?
gerikson 4y ago
Does anyone have a link to the suit itself ?
- haasted 4y ago
  I believe it's this : https://storage.courtlistener.com/recap/gov.uscourts.txwd.1188185/gov.uscourts.txwd.1188185.1.0.pdf https://storage.courtlistener.com/recap/gov.uscourts.txwd.11... Courtesy of https://web3isgoinggreat.com/?id=coinbase-funds-lawsuit-against-the-treasury-department-over-tornado-cash-sanctions https://web3isgoinggreat.com/?id=coinbase-funds-lawsuit-agai...
  - gerikson 4y ago
    Thank you!
- mzs 4y ago
  The complaint is linked here, you can make a free trial account: https://www.law360.com/articles/1528566/attachments/0 https://www.law360.com/articles/1528566/attachments/0 https://www.law360.com/articles/1528566/coinbase-backs-suit-against-treasury-over-tornado-cash-ban https://www.law360.com/articles/1528566/coinbase-backs-suit-...
turdnagel 4y ago
This is definitely a pandora's box type issue. I believe it is different from the "code is speech" series of arguments around PGP because a deployed smart contract is not merely source code / compiled bytecode, but also a wallet containing funds. Of course, you still need the Ethereum "world computer" to make it run, and Tornado Cash is not very helpful without a significant amount of liquidity to sufficiently provide cover for people who want to obfuscate the source of their funds. These issues are likely to arise in court and I don't believe the conclusions will all be favorable to crypto supporters because I don't think the situation is as clear cut.
- dcolkitt 4y ago
  When a smart contract is deployed, literally all that happens is that the code is broadcast to the network. It is true that the contract itself has a wallet and runs operations, but it operates autonomously outside the control of the person who deployed the contract. If a smart contract does something illegal, the person who deployed it has no more responsibility than if someone does something illegal with encryption software downloaded from Github. The only responsible part you could really argue for is the Ethereum node operators, since they're the ones actually carrying out the illegal computation. But is the government really going to outlaw the Ethereum network?
  - Jasper_ 4y ago
    Here's a thing: when technology is designed in a way that makes it hard to work within the bounds of the legal system, it's usually the case that the legal system wins, not the technology. The view of the legal system is focused around people and their intentions, regardless of how much you try and confuse things with technology. They will most likely view the smart contract and its wallet as one entity, despite that being technically not how it works technologically. Because as many people have tried and failed to figure out over the years, laws are interpreted by juries and judges, not computers. Technological roadblocks are things they don't have any problems jumping over, and deliberately trying to add roadblocks like that with the imagination they're untouchable also tends to piss them off even more.
programmarchy 4y ago
If Tornado Cash could be banned, couldn't the same logic be used to ban Tor? The former obscures financial transactions, and the latter obscures communications, but there's a similar principle in play.
- kibwen 4y ago
  The US military itself uses Tor. They don't want to ban it, because even if the traffic on Tor is illicit, it still serves to mask the military's own traffic. Don't forget that Tor was originally developed by the US Navy.
  - realce 4y ago
    I hear NK uses it too, it should probably be made devastatingly illegal therefore.
    - staringback 4y ago
      Most of HN actually thinks like this unfortunately
  - bitxbitxbitcoin 4y ago
    I’d be willing to bet there is US government black budget money that moved over Tornado Cash, too. The issue then becomes that Tornado Cash wasn’t originally developed by the govt and whatever further implications that has.
  - netheril96 4y ago
    That is the point of your parent comment: defeating their argument by their logic. To be logically consistent, the US should either ban both Tornado Cash and Tor or allow both.
  - iotku 4y ago
    >The US military itself uses Tor. They don't want to ban it That's not really any reassurance in the long term, if they find a better/different solution that goes out the window.
yieldcrv 4y ago
This is the least spineless thing Brian Armstrong has ever publicly done And I think we should commend him for that since there really are consequences for his relationship with the government and Coinbase’s relationship with the government
roleplayer 4y ago
Missing from this conversation is the fact that TC was specifically designed to be able to prove your input/output if law enforcement requests it.
- dannyw 4y ago
  Also, TC took zero fees, had immutable smart contracts with no privileged roles or admin keys, etc, is open source. It is code.
- capableweb 4y ago
  I used Tornado Cash (non-US citizen here) for hiding transactions from the public (not hiding from the government), and when I filed my taxes, I still accounted for everything that is stored there + transacted via Tornado Cash, just like I do for my bank account. Appendix contained instructions for how they could access the proof of my transactions and accounts to verify themselves.
  - zeusk 4y ago
    > I used Tornado Cash (non-US citizen here) for hiding transactions from the public (not hiding from the government) And how exactly does your bank account publish your transactions to the public?
    - capableweb 4y ago
      I think you misunderstand. Transactions happening on most blockchains are public, meaning if I send a transaction on the network, if others know my address, they know it was my transaction. Tornado Cash allows you to sever the tie between addresses on the Ethereum blockchain, so I don't have to have my transactions public, all while still being able to legally declare my taxes as if I didn't use Tornado Cash at all.
deleted 4y ago
[deleted]
SpicyLemonZest 4y ago
I think the crypto framing obscures the story here. If the government issued sanctions against a traditional financial organization engaged in money laundering, and then Goldman Sachs bankrolled a lawsuit arguing that the organization is allowed to engage in money laundering due to some quirk of the organizational structure, everyone would understand what's going on and nobody outside of the finance industry would be on the pro-lawsuit side.
- dannyw 4y ago
  The sanctioned entity here is a piece of code that uses zk-SNARK cryptography, in a permissionless and immutable way. There are no admin keys, there is no ownership, it is code. It's not an organization. This is more like the FBI banning GPG because terrorists use it. FTA: > They contend that the Treasury Department lacks the authority to restrict access to a software program. This is the point. No one would have batted an eye if OFAC sanctioned addresses that used TC to launder money. Nobody would have batted an eye if the FBI prosecuted criminals for using GPG to plot a crime. But what happened here is akin to the FBI, using powers that it hasn't been granted in law, to ban GPG.
  - x86x87 4y ago
    Hahaha... you cannot make this thing up: https://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_investigation https://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_i...
  - intrasight 4y ago
    Code has been, can be, and will be sanctioned. Will they be successful is a different question. The SEC is well-funded, has a strongly supported mandate, and has a long arm. They are playing a long war of attrition.
    - dannyw 4y ago
      the SEC isnt involved here .
helen___keller 4y ago
I kind of agree that Treasury should not have exactly this power to ban Tornado protocol. However, I believe Treasury certainly has the power to ban all transactions with networks hosting money laundering protocols. It would certainly be worse for crypto if it were illegal to buy sell ETH and friends because their networks host Tornado protocol. I see this attempt to moderate the network itself as “going easy” on crypto investors. The crux of the issue comes down to moderation. In a sufficiently large and complex network, moderation becomes a necessity not an option. This won’t be the last case. Regulators generally strike when sufficiently popular technology makes it sufficiently easy to perform sufficiently damaging illegal activity.
- dannyw 4y ago
  Moderation is generally not required under US law. For example, Section 230 of the Communications Decency Act provide safe harbor provisions: 'No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider'. It doesn't matter if I run a site with 10 users or 100 million users: the law's provisions and protections are the same. You are right that regulators generally strike when there is a critical mass. However, my 2c is that this is not backed by statue, and US Treasury does not have the right to sanction software code. They can certainly sanction users who use TC for money laundering, but code itself? That's like sanctioning PGP or end-to-end encryption...
  - helen___keller 4y ago
    Sorry to be clear, I’m not claiming moderation is legally required, I’m claiming it effectively becomes necessary for a network to avoid stepping on landmines. For example, it’s impossible to run a social network website of 100 million users without users uploading illegal content. Moderation is a necessity to avoid being taken down by the feds for hosting illegal content. I agree that treasury doesn’t have the right to sanction code. They do have the right to ban exchanges from exchanging ETH. However, nobody wants that, so they’d rather try and extend their powers to effectively become ETH moderators.
- 4y ago
cdiddy2 4y ago
Tornado Cash has a great feature that you can use to prove the source of funds that were withdrawn from it as needed. This would allow exchanges to implement something where funds from Tornado could have to provide this proof before depositing. It could be fully compliant with both privacy and what exchanges/governments want. Coin Center does a great write up of it here, under "Compliance Tool" https://www.coincenter.org/education/advanced-topics/how-does-tornado-cash-work/ https://www.coincenter.org/education/advanced-topics/how-doe...
NelsonMinar 4y ago
Mixers never fail to astonish me. They are explicitly a product to facilitate money laundering. They are marketed as a way to wash illicit funds. And then the folks who run them get mad when law enforcement tries to shut them down?
- cdiddy2 4y ago
  They are explicitly a product for user privacy. Given that the depositor can prove the source of funds put into tornado cash via a zk-proof there is no reason that this should be shut down.
  - ASalazarMX 4y ago
    > They are explicitly a product for user privacy That's the facade. In my experience, Bitcoin is still the main ecoin demanded in phishing/ransomware incidents, even when more privacy-friendly ecoins exist. A tumbler's purpose is distorting Bitcoin's public blockchain (one of its core tenets), and that's very attractive to criminals.
    - cdiddy2 4y ago
      Of course its attractive to criminals. Same reason they love cash. Doesn't mean that we should ban cash
      - JumpCrisscross 4y ago
        > Doesn't mean that we should ban cash Mixers aren’t banned. A mixer that was used to launder money by North Korea was.
        Laaas 4y ago
        All decentralised (non-custodial) mixers could be used by North Korea. Should they all be banned?
        cdiddy2 4y ago
tmpz22 4y ago
Can anyone defending Tornado Cash provide a concrete example of mixing crypto revenues in a way that is not clearly illegal? I've scrolled this whole thread, and there are a lot of people defending it, but none of them provided a full e2e example of "I sell x to y, y can only use crypto, y will be persecuted if I don't obscure my transactions from z, so therefore this is a good thing" Yes we can all do the hypothetical "dissident in AUTHORITARIAN_COUNTRY needs to buy x and will totally be persecuted otherwise" but I want an actual production example not a moral whataboutism.
- bornfreddy 4y ago
  From the article: > One plaintiff in the lawsuit is a crypto investor who used Tornado Cash to send funds to support the Ukrainian war effort, hoping to preserve his anonymity and avoid retaliation from the Russian government.
  - tmpz22 4y ago
    Ok so a user who already has crypto and doesn't want to convert it first (fees) may be encouraged to mix it (privacy) and that is a legitimate usecase. That makes sense to me, though it seems like a very rare event that should not be the sole basis for the underlying platform. Also I should've read the full article first.
    - bornfreddy 4y ago
      Not sure how rare it is. There is lots of people who got crypto-rich. It is easier to donate money that came easily... I would assume making a nontrivial donation in fiat privately is also very difficult.
    - yieldcrv 4y ago
      > though it seems like a very rare event that should not be the sole basis for the underlying platform. not rare, 12,000+ unique users on just the ethereum network alone only a handful would be from large scale hacks, a bigger handful from phishing even the treasury's estimates were that less than 20% of use was illicit, it is a totally new standard to vilify it based on whatever it is vilified for https://dune.com/poma/tornado-cash_1 https://dune.com/poma/tornado-cash_1
letsgo39 4y ago
I just want to say, I find it very Orwellian that HN shuts down immediately any conversation about theft of IP through these 'archive.ph' links, and even removes the 'reply' button to ensure so. Just watch how quickly this comment will disappear or get downvoted.
- dang 4y ago
  (FWIW, users flagged your comment.) Could you please stop creating accounts for every few comments you post? We ban accounts that do that. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. You needn't use your real name, of course, but for HN to be a community, users need some identity for other users to relate to. Otherwise we may as well have no usernames and no community, and that would be a different kind of forum. https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix&page=0&query=community%20identity%20by:dang https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...
2OEH8eoCRo0 4y ago
Have your cake and eat it too. Files lawsuit to continue breaking the law. I suppose the lawsuit is a good thing. The government will have to defend their decision in court which will strengthen their position regardless.
siilats 4y ago
Look treasury can ban Bitcoin addresses and then make tumbler not accept incoming money from certain addresses. But if they haven’t done it they cannot go retroactively say tornado cash laundered North Korean money. If the address was obviously North Korean treasury should have banned it.
wollsmoth 4y ago
I think my crypto info is behind the times. Can someone explain to me why people don't just exchange crypto for monero and then back if they want to "wash" it?
- chizhik-pyzhik 4y ago
  Tornado is nice because you can stay entirely within the Ethereum blockchain- no need to involve a centralized entity like an exchange to facilitate this. It's also arguably more private than monero. Tornado uses zk math instead of coinjoin; tornado also sticks to only a few values (1 eth, 10 eth, 100 eth...) which minimizes traceability
- martinko 4y ago
  Generally you need to use a custodial exchange to do this, which creates a point of failure/censorship. Doing this onchain / trustlessly on protocols such as thor have significant liquidity limits afaik.
  - wollsmoth 4y ago
    I thought you could use something like uniswap which should avoid that I think? Haven't tried myself.
- from 4y ago
  Changenow and Morphtoken have very high slippage when you get in the millions of dollars also these are (temporarily) custodial exchanges who could basically take your money and say GFY. Coins from these exchanges are tainted anyways so it doesn’t really make a difference from a laundering perspective along with the fact that the fees are higher.
- LatteLazy 4y ago
  This is effectively a test case for banning Monero etc. This is similar because it's just a tumbler, not a currency etc with a Tumbler built in.
  - 4y ago
intrasight 4y ago
The "we are not a person or organization" argument sort of breaks down once you file a lawsuit.
- chizhik-pyzhik 4y ago
  The argument made by the plantiffs is that they were harmed by the Treasury Dept's action. One of the plantiffs deposited funds into Tornado for personal privacy, and now cannot legally access these funds. https://storage.courtlistener.com/recap/gov.uscourts.txwd.1188185/gov.uscourts.txwd.1188185.1.0.pdf https://storage.courtlistener.com/recap/gov.uscourts.txwd.11...
  - null0pointer 4y ago
    Is it possible the court will just say "Plaintiffs get a one-time opportunity to declare the source of and withdraw their funds from the contract"? I don't know if this is the sort of thing a court can do but it seems like the obvious solution to eliminate the damages to the plaintiffs while keeping the sanction in place.
    - intrasight 4y ago
      That would be a good outcome
- everfree 4y ago
  Serious question: Why? The suit doesn't represent that Tornado Cash itself is a legal person, in fact it represents the opposite. "Tornado Cash" is not the plaintiff.
Animats 4y ago
Does TornadoCash still need people to run it? Or is it just contracts in the Etherium blockchain?
- everfree 4y ago
  The part that was blacklisted was just the contract addresses.
- verdverm 4y ago
  It is autonomous but relies on people to create liquidity
bruiseralmighty 4y ago
Hasn't precedent already been set for privacy protocols? I know the government tried to stop encryption by listing it as a munition, but they eventually lost that fight on first amendment grounds. It is hard to argue that code is not a kind of speech or expression and thus it gets some of the highest legal protection possible under U.S. law. Tornado Cash is just a coin mixer implemented through smart contracts yes? The 'coins' themselves already enjoy some first amendment protection by being built on top of the protected encryption protocols. The smart contract itself is just another communication protocol defined in code. So it seems patently obvious that TC is allowed to exist under U.S. law. The only remaining question is whether anyone can be allowed to use it. We actually have to get deep into first amendment jurisprudence to answer that question. Generally speaking all speech is permitted but, when it is paired with conduct, the conduct can be regulated by time, place, and manner. This at first appears a simple distinction for us. Users of TC or any e-coin standard are _conducting_ transactions. But this is thorny. Commerce used to be conducted entirely physically with an exchange of cash. Then it was done with an exchange of electronic funds on a banks balance sheet; essentially a change on two different excel spreadsheets. But the btc-protocol and its derivatives don't function like this. They use a ledger. When we transact in e-coins we don't exchange anything. No digital coins fly from my computer to yours or vice versa. Rather all that happens is a message is sent to a public server which contains enough information to allow that server to determine that we both agreed to send that specific message. The server then updates the ledger and publishes this change to other servers hosting the ledger so there is agreement that we exchanged value. It's not actually 100% clear that when communicating this way we have conducted anything. Sending encrypted messages like this has been determined to be first amendment protected activity as pure speech. Indeed we wouldn't have an internet today if it weren't. Having a message be encrypted inherently provides privacy and precludes restrictions on a message's content. Even when that message's content includes information to exchange value. Citizen's United also has some precedent over whether speech + conduct regarding money transactions are permitted speech when that speech is political in nature. This leaves us only with the few recognized non-speech categories with which to regulate pure speech: > lewd, obscene, or pornographic content; defamatory content; insulting or “fighting words”; expressive content that tends to inflict injury; speech that incites an immediate illegal conduct such as riot or violence; speech that poses an imminent threat to public safety or national security; false or misleading commercial advertising; and perjury. There are a few categories here that may help us. Inciting immediate illegal conduct and imminent threat to public or national security. To qualify as incitement to illegal or a threat to public safety the speech has to pass the 'clear and present danger' test. This test has two parts: * first, the speech must impose a threat that a substantive evil might follow * second, the threat is a real, imminent threat. This test is extremely hard to meet and just because the TC protocol is may be or even if it is likely to be used for money laundering it will likely never rise to the threshold of this test in a U.S. court. Cases where speech does meet this threat are specific threats or instructions. If TC included specific instructions on how to evade law enforcement then that may qualify. This leaves only threats to national security as a legal basis. We have to begin by saying that many of the use of national security as a means to restrict the rights of Americans has an extremely checkered past. These were the arguments that bullied journalists under the red scare, interned the Japanese in WWII, attempted to stifle the pentagon papers after the Vietnam War, maintained the patriot act of 2001, lead to secret courts with secret evidence, torture, suspension of habeas corpus, etc. However, the standards for what constitutes a threat to national security have been much degraded in the past two decades. You could probably convince a judge or even SCOTUS that the use of TC by foreign hostile powers like North Korea and its potential to be used as a tool of terrorism from the likes of Iran and ISIS constitute a threat to national security. But arguing this not only degrades your moral character, it is also unlikely to be effective in the long term. We did reinstate habeas corpus, we un-interned the Japanese, and we did publish the Pentagon papers. Hopefully we will also get rid of the Patriot Act in the coming decades. And even if TC was determined to be a threat to national security, that determination would likely one day be reversed as an understanding of the technology and its necessity aged into the judicial system.
ESTheComposer 4y ago
Love that a large chunk of negative sentiment comments here are from one private equities trader. Pretty telling imo. Anonymity is not a crime
intrasight 4y ago
> "Tornado Cash is not “property,” a “foreign country or a national thereof,” or a “person” of any kind under IEEPA." The president has much discretion here. That was the whole idea of IEEPA. I think the best case outcome of this lawsuit to crypto is that courts just toss it. Worse case is that IEEPA is effectively amended to say that a DAO is a person.
secondcoming 4y ago
Why can the NYT still use the term 'blacklist', when it has been purged from Software?
- anotherrandom 4y ago
  It hasn't been, it is still widely used. The fact that people outside of the software world are unaware of that even happening shows how few people actually hopped on board that train
colinsane 4y ago
cryptocurrency is a challenge to the state. Bitcoin’s first block quotes a news headline “Chancellor on brink of second bailout for banks” in order to establish the chain’s age. that message isn’t a mistake: Bitcoin emerged to challenge the state’s control over the monetary system. 13 years later we’re all caught up in surface-level details like “is this cryptocurrency thing a security” and “is this cryptocurrency mixer money laundering” meanwhile the basic premise/existence of cryptocurrency has been accepted de-facto. surface-level regulations just kick the can down the road. beneath that surface is still a massive challenge to the state, only more diffuse, and that interior shapes the surface much more than the other way around. governments need to make up their mind: are they OK with yielding control over the money system, or not? right now the answer looks like “yes, but we’re going to drag the process out”, which is sort of the worst thing for everyone. drawn-out wars hurt everyone. US ought to either ban cryptocurrency (private currencies) altogether, or step aside and let it happen.
HereIGoAgain 4y ago
More power to them. The idea that you shouldn't be able to use something because it CAN be used for crimes is repugnant and dangerous to a free and open democratic society. Plus this is all pretty much settled law is it not?
- colinmhayes 4y ago
  Tornado was used to launder something like a billion dollars by the north koreans. This is not a CAN be used for crimes situation. It was used to facilitate crimes.
psyfi 4y ago
Monero.

I_cape_runts 4y ago

I take this as an endorsement that it works.

AntonyGarand 4y ago

https://archive.ph/ZIWNt https://archive.ph/ZIWNt

mikece 4y ago

Banning a service because it "might be used for illegal purposes" is insufficient. This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. I would rather money-launderers get away with things and for freedom to prosper than to have an all-encompassing surveillance state.

cguess 4y ago
It was used for tumbling, to the tune of $450m by the North Koreans. It's not a theoretical situation.
- mikece 4y ago
  And yet, somehow, we knew exactly who was doing it. Why the urgency to shut it down?
  - belval 4y ago
  - nh23423fefe 4y ago
    You could just read what treasury wrote and argue with facts instead of vague rhetoric about lazy law enforcement > “Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.” https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
    - DennisP 4y ago
      There are two Tornado Cash entities: one is made of people, and the other is autonomous code running on chain. The OFAC action confuses those two, and it's not clear they have the authority to sanction code. For much more on this, see the legal analysis by Coincenter: https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-entity-in-the-tornado-cash-case/ https://www.coincenter.org/analysis-what-is-and-what-is-not-... Note that FinCEN does pay attention to this sort of distinction, and says that software providers are not subject to money laundering regulation.
  - wil421 4y ago
    Why should North Korea be allowed to steal and hack from other country’s people and organizations? It should be shut down immediately. I feel like your trying to say NK and Tornado should be able to do illegal activities that harm people. Just because you don’t like the police or something.
    - mikece 4y ago
      The very fact (or assumed fact) that we know North Korea is using this undercuts the argument that we need to shut this down because it allows for anonymous money laundering. (By definition: the only way money laundering can be "dangerous" is if it cannot be detected or the players identified.)
      - yunohn 4y ago
        No, in this, the authorities had the time/money to track down the hackers. The vast majority of tornado transactions are mostly illegal, but nobody cares enough to spend their efforts on them.
        x86x87 4y ago
        What a world we are living in. Mostly illegal. Huh. Do you have any data to back this claim? Also, should banks be banned if their customers are doind shady things outside of using their services?
        polygamous_bat 4y ago
        If it's a mafioso bank used mostly by the mafia, then yes, absolutely, they should be investigated and shut down. As for data, just as a first-order estimate, check out the rekt leaderboard [1] and see how many of the stories end with "and the stolen funds were routed through tornado, fin." If all crypto-adjacent crimes are reported to FBI at some point I am sure they have a much clearer statistics, but even as a civilian you can see that it's not small. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
  - giaour 4y ago
    I don’t follow your logic. Isn’t the whole point of mixers that everyone can see dirty money go in, then the forensic trail stops?
  - amalcon 4y ago
    Let's suppose you have Bob's Traditional Bank. They keep meticulous records, and comply with US government requests for them (regardless of what you think of such practices, let's just say that this particular bank happens to do those things). They also facilitate transactions on behalf of North Korea. Bob's Traditional Bank would be sanctioned here, because transacting with North Korea in that way is what triggers these sanctions. This is why Tornado is being sanctioned. The privacy thing may or may not be illegal, despite its ineffectiveness, but the transacting with North Korea thing definitely is.
- ballenf 4y ago
  And what's the value of drugs trafficked over public highways? Or illegal activity coordinated over SMS? Using volume of illegal activity cannot be the primary factor in categorizing a platform.
  - yunohn 4y ago
    You’re right, a crypto mixer primarily used to launder money or evade taxes is *exactly the same* as highways and SMS.
    - lampshades 4y ago
      - Closi 4y ago
        Let's imagine for a second that I owned a physical bricks-and-mortar business with a shopfront that took physical cash (USD banknotes), then mixed it up in a big laundry machine with banknotes from other customers, and then I give you back some other banknotes which are totally random (less a fee). Let's also say I don't do any Know Your Customer checks (KYC). Do you think that should be legal (like highways and SMS) or illegal (like money laundering)?
      - polygamous_bat 4y ago
        You can literally go through the rekt leaderboard [1] and count how many of the stories end with "and then the funds were routed to tornado cash, fin." It's not exactly a secret, and it doesn't require any specuation. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
      - res0nat0r 4y ago
        ? https://home.treasury.gov/news/press-releases/jy0916 https://home.treasury.gov/news/press-releases/jy0916
- sam0x17 4y ago
  If that's the cost of a freer internet that's fine with me. I don't care if it's $10t.
  - x86x87 4y ago
    That's a very limited way of looking at things. You're fine with banning X and Y because you don't see them impacting you. When Z is banned and you care about Z you'll have a rude awakening.
    - nibbleshifter 4y ago
      I think the poster was saying they are fine with that amount if laundry, because its more important for a free internet to exist.
      - x86x87 4y ago
        After rereading I agree with you. It wasn't clear to me whem first reading it.
    - npc54321 4y ago
      It's obvious sam0x17 is against blocking anything.
  - deleted 4y ago
    [deleted]
- whatisweb3 4y ago
  450m is a whopping 6% of all deposits on Tornado Cash[1]. The total percentage of illicit activity on the protocol is reported to be in the 10-30% range[2]. What percentage of activity in an E2EE chat application like Matrix is illicit? If a significant but minority percentage of its use is facilitating criminal discussion, should those open protocols also be sanctioned? [1] https://dune.com/poma/tornado-cash_1 https://dune.com/poma/tornado-cash_1 [2] https://www.eff.org/deeplinks/2022/08/code-speech-and-tornado-cash-mixer https://www.eff.org/deeplinks/2022/08/code-speech-and-tornad...
  - pclmulqdq 4y ago
    This isn't about the fraction of illicit use. A large fraction of Americans with numbered/anonymous Swiss bank accounts did nothing wrong with them - a much larger fraction than tornado cash users. However, they were still banned for US citizens due to US KYC rules. The land of free speech is obsessed with being able to trace money as it travels. No surprise they would go after a service whose explicit purpose is to break the chain of custody on money.
    - bitxbitxbitcoin 4y ago
      Banning the use of Tornado Cash is one thing - I didn’t see any Swiss bankers arrested or prosecuted for money laundering during that move.
      - pclmulqdq 4y ago
        You mean like these Swiss bankers? https://www.reuters.com/article/us-usa-switzerland-tax/ex-swiss-banker-goes-home-after-u-s-loses-extradition-from-germany-idUSKBN13Y23N https://www.reuters.com/article/us-usa-switzerland-tax/ex-sw... https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-charges-swiss-lawyer-and-swiss-banker-conspiring-hide-millions https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-c... https://www.justice.gov/opa/pr/former-ubs-banker-charged-helping-us-taxpayers-use-secret-swiss-bank-accounts-evade-us-taxes https://www.justice.gov/opa/pr/former-ubs-banker-charged-hel... This wasn't mainstream news, but neither was the sanctioning of Tornado cash. You just happened to hear about one but not the other.
jfim 4y ago
How much of it is used for legitimate reasons versus illicit ones? If the overwhelming majority of the transactions are illicit, it makes sense to ban it.
- Wowfunhappy 4y ago
  I agree with you, but I'd like to point out that the same logic could be applied to e.g. game console emulators. ...and as much as I hate to say it, I do think the logic might be correct in both situations. (I say this as a heavy user of console emulators—albeit also as someone who does go through the trouble to legally dump his own games.)
  - criddell 4y ago
    I don't know that it's really an apples-to-apples comparison. Console emulators are a copyright issue and those are generally (but not always) civil matters.
  - jfim 4y ago
    It depends on how you see it. One way to look at it is to say "I derived this rule based on what the ratio of licit to illicit usage is, thus it should apply everywhere." From that perspective, then yes, your observation that it would apply to both situations is correct. Another way to look at it is "for this particular scenario, what is the optimal outcome?" If you're running a game console emulator for a system that's not being sold anymore, with games that are not being sold anymore, one could argue that that scenario would be net positive considering the lack of harm; in other words, you get to enjoy the game, while nobody gets hurt, so it's positive overall. The first perspective is called "rule utilitarianism," while the latter is called "act utilitarianism," in case you want to learn more about those.
- dsr_ 4y ago
  It makes even more sense to allow it, and regulate it. The regulation should be the existing Know Your Customer requirements plus a 100% traceable log subject to inspection, auditing and subpoena.
deleted 4y ago
[deleted]
JustLurking2022 4y ago
It's a service specifically designed to facilitate money laundering. It's a bit like running a business that produces paperwork to make stolen cars indistinguishable from legal ones - there's no reason such a service should be allowed to exist.
- junofan 4y ago
  Can’t law enforcement use search warrants in their own jurisdiction?
- devoutsalsa 4y ago
  So are casinos, banks, money exchanges, and hot dog stands. There are tons of reasons for wanting privacy that have nothing to do with money laundering. Avoiding kidnapping & ransom because someone can’t see the size of your crypto wallet for example.
  - zeusk 4y ago
    You're really saying; banks, money exchanges and hot dog stands have no other utility other than to "wash" money?
    - bitxbitxbitcoin 4y ago
      It’s reductionist but yes - “washing” money is a core part of their function. Note OP didn’t say laundering.
      - woodruffw 4y ago
        No, it isn't. Banks exist to induce stability and liquidity (i.e., the efficient flow of capital) within the economy. Hot dog stands exist to sell hot dogs. Money exchanges exist to transfer currencies to (you guessed it) facilitate commerce in different regions. The hair you're attempting to split between "laundering" and "washing" does not exist in the financial world, and would not impress financial regulators.
speedylight 4y ago
You could also say that Silk Road was an E-commerce business that might’ve been used to sell drugs, who knows!
- x86x87 4y ago
  Not one to defend Silk Road, but pause and think about it for a second: it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) People were breaking stupid laws from the 70s established after mass hysteria around drugs by one of the scummies US president ever. More than that, the tax man was not getting its cut. Now to put things in perspective let's compare to some things US agencies have done in the past: https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_trafficking https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_traf...
  - FireBeyond 4y ago
    > it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question) Because there was all sorts of white washing like this. "It's drugs, but safer, and without the violence and crime!" If you think that violence, crime are magically gone because of Silk Road, you'd be considered ignorant or naive. Production still happens in the same places, the poverty, corruption and violence-stricken areas. It's just invisible to you now, because you don't have to worry about your dealer stealing from you, getting mugged, or buying from an unknown source, or being arrested. All those people in Mexican and Colombian villages subject to the tyranny of the cartels... oh well. All good then, I suppose.
    - npc54321 4y ago
      > All those people in Mexican and Colombian villages subject Just go into the frigging villages and arrest the cartel leaders oh wait they are in cohort with the governments of those countries...
Forrest7778 4y ago
It's not a black and white issue; things aren't getting banned because they might be used for illegal purposes, that is even explicitly stated in the article.
woodruffw 4y ago
"Might be used for illegal purposes" is a significant understatement. The chief selling point of Tornado Cash is money laundering, which is in and of itself a crime in both the US and Netherlands. Normally, there'd be an aspect of plausible deniability: torrent index operators can, for example, rightfully claim that they're facilitating legal filesharing, or that they're entirely agnostic to the content being shared (if all they're doing is sharing URLs). What's key in this case is that law enforcement claims that Pertsev was aware of the crimes his service was being used for. Whether or not that's actually true is up to a court to decide.
- TEP_Kim_Il_Sung 4y ago
  The chief selling point of Tornado Cash is that it's distributed open-source software, with no man in the middle, no single point of failure. That's right: Government sanctioned open-source SOFTWARE. Are you sure you want this precedent set?
  - woodruffw 4y ago
    I have no problem with Tornado Cash being openly available software under a permissive license. I have a problem with people running a Tornado Cash-based service that is really just a money laundering service. You should take a step back: "open source" does not rinse away the underlying properties of a service. I can't write and deploy a web application that contracts hitmen and use the MIT license as a defense; the latter simply isn't being litigated.
    - theplumber 4y ago
      What's the difference between money launderying features and privacy features? Tornado Cash in itself does is not launderying money because you still have to prove to the IRS how you got the money or the asset(i.e bills, invoice etc) and you still have to obey KYC rules. You can't just say the money is from Tornado Cash and be done with it. Is the U.S Mint a money launderying service because it provides an untraceable method (cash) to conduct transactions?
ouid 4y ago
You seem to think that freedom means a world in which you are allowed to hide your assets from the government. You have never been allowed to do that. You're going to have to change the law, and because you live in more or less a democracy, you're going to have to convince people that its good to change the law.
- TEP_Kim_Il_Sung 4y ago
  For the time being the government has yet to decide wether crypto is money, a currency, an asset, or a security. Instead it has been going after people for all of them.
  - qeternity 4y ago
    Because crypto claims to be all 3 and has created various forms that behave like all 3.
    - TEP_Kim_Il_Sung 4y ago
      This would hold up if government treated individual forms individually, yet they mix&match arbitrarily.
- bruiseralmighty 4y ago
  History did not start in 1913. Income is not an asset, they have been two different things for longer than the United States has existed as a country. Most governments in recorded history have managed to exist without taxing income. It would in fact be better live in a country with financial privacy where assets form the tax base instead of income. In terms of convincing the public, I think time will do the former and education the later.
marginalia_nu 4y ago
> This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. The flaw with this line of reasoning is that behaviors have changed. In the past, when the police did "police work", people had no choice but to meet in person to discuss their criminal enterprises. You could follow them, and listen in. Many illicit schemes also left a trail of paper that needed to be stored in physical space. It's not that the police have gotten lazy, it's that if you expect criminals to hang out in a shady dockside speakeasy like they did when Al Capone ran the town, you're simply not going to find anything. This is a real tricky problem to which I'm not sure there are good solutions. There's a mounting conflict of interest upholding the law on the one hand, and the interests of law-abiding citizens on the other.
jmyeet 4y ago
You have to remember that access to the US financial system is a privilege not a right. To be granted that privilege, a financial institution has a number of obligations. Thesee include various KYC/AML obligations. So this isn't Tornado Cash "might be used for illegal purposes" so much as it's clear evidence they're failing to meet their legal obligations. There's a larger point here too: as much as proponents tour crypto's extragovernmental status, it would take very little effort by governments to completely cripple any crypto assset in practical terms.
- bruiseralmighty 4y ago
  So proposing a hypothetical. If the only issue here is obligation to the U.S. financial system what if the only on-off ramps to e-coins were cash only? So as an individual, I convert my cash to e-coins through some e-coin dedicated ATM-like machine. And I can redeem my e-coins for cash at another e-coin-ATM somewhere else (maybe anywhere in the world). Would coin pools like Tornado Cash then be acceptable? It would not be tied in any way to the credit or banking systems, it takes cash only, and then just a basic utility internet connection. Maintenance for the machines and paying the internet utility would just be a fraction of a percentage fee on each transaction. Now all e-coins would simply exist as a privacy themed alternative ecosystem to cash. Since we are not joining the U.S. financial system, these e-coins should not be expected to have any obligations to that system correct?
0x_rs 4y ago
Criminals are most certainly going to get away with it regardless of how many restrictions and surveillance you apply to the little people, as they have the means (capital) to do so. I don't want to stretch it too far, but the current rules seem nearly purposefully pointed towards the least effort category. There's quite a lot of coverage on this matter, some (and a lot in the cryptocurrency scene) like to cite works from Ronald F Pol who has done a lot of heavy handed criticism on AML et cetera (as far as claiming less than one percent of real-world regulations effectiveness), these claims can be disputed, but it's apparent even to mainstream publications most unlawful flows are uninhibited and the approach is ineffective, expensive and dangerous. https://www.economist.com/finance-and-economics/2021/04/12/the-war-against-money-laundering-is-being-lost https://www.economist.com/finance-and-economics/2021/04/12/t... https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_scandal https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...
croes 4y ago
Are you sure they are lazy or are they just underfunded and with to few personnel?
- A4ET8a8uTh0 4y ago
  It probably depends. I live in Chicagoland. Cops here are a lot of things, but I can't honestly say they are underfunded. The pension alone is likely worth the risk ( source: couple cops in my extended family ) even if money is not staggering ( and it still not on the low end by any means ). But to go back to the original query. It is just so much more easier to click couple of buttons than go somewhere and ask questions. It is cheaper too. The convenience trumps most of the other reasons. The same goes for privacy. The convenience killed it.
Fnoord 4y ago
If its used for a high percentage of criminal purposes (for example 90%) banning is legitimate. Also, who are these "investors"? They're speculators. When you speculate, there's risk involved. This is one of them. This case is an unnecessary burden on our legal systems, I hope it gets thrown out of court ASAP.
Sir_Liigmaz 4y ago
The USA PATRIOT Act requires every financial institution and money service business have an AML department. There are thousands of people in the US that are paid to look at your bank account and decide if you've been naughty or not and narc to the feds if you have. This is happening everyday. We are already living the surveillance state.
barelysapient 4y ago
At this point, failure to comply with the statute means a violation of law; regardless if any criminal laws were observably broken or not.
davidguetta 4y ago
wait what ? literally the entire point of financial regulations is to avoid it to "possibly be used for illegal purposes". Starting with the very basic KYC regulation, or the fact that in many countries cash transaction above a limit are forbidden. I'm all about privacy and anonymity of transactions personally, but tornado investors going all "surprised pikachu" right now after a more-than-previsible ban is a bit laughable...
jjtheblunt 4y ago
> they are lazy ?
houstonn 4y ago
A question for those in this thread who want to ban a privacy service because it's utilized for unlawful activity: What's your opinion of Tor?

gerikson 4y ago

Does anyone have a link to the suit itself ?

haasted 4y ago
I believe it's this : https://storage.courtlistener.com/recap/gov.uscourts.txwd.1188185/gov.uscourts.txwd.1188185.1.0.pdf https://storage.courtlistener.com/recap/gov.uscourts.txwd.11... Courtesy of https://web3isgoinggreat.com/?id=coinbase-funds-lawsuit-against-the-treasury-department-over-tornado-cash-sanctions https://web3isgoinggreat.com/?id=coinbase-funds-lawsuit-agai...
- gerikson 4y ago
  Thank you!
mzs 4y ago
The complaint is linked here, you can make a free trial account: https://www.law360.com/articles/1528566/attachments/0 https://www.law360.com/articles/1528566/attachments/0 https://www.law360.com/articles/1528566/coinbase-backs-suit-against-treasury-over-tornado-cash-ban https://www.law360.com/articles/1528566/coinbase-backs-suit-...

turdnagel 4y ago

This is definitely a pandora's box type issue. I believe it is different from the "code is speech" series of arguments around PGP because a deployed smart contract is not merely source code / compiled bytecode, but also a wallet containing funds. Of course, you still need the Ethereum "world computer" to make it run, and Tornado Cash is not very helpful without a significant amount of liquidity to sufficiently provide cover for people who want to obfuscate the source of their funds. These issues are likely to arise in court and I don't believe the conclusions will all be favorable to crypto supporters because I don't think the situation is as clear cut.

dcolkitt 4y ago
When a smart contract is deployed, literally all that happens is that the code is broadcast to the network. It is true that the contract itself has a wallet and runs operations, but it operates autonomously outside the control of the person who deployed the contract. If a smart contract does something illegal, the person who deployed it has no more responsibility than if someone does something illegal with encryption software downloaded from Github. The only responsible part you could really argue for is the Ethereum node operators, since they're the ones actually carrying out the illegal computation. But is the government really going to outlaw the Ethereum network?
- Jasper_ 4y ago
  Here's a thing: when technology is designed in a way that makes it hard to work within the bounds of the legal system, it's usually the case that the legal system wins, not the technology. The view of the legal system is focused around people and their intentions, regardless of how much you try and confuse things with technology. They will most likely view the smart contract and its wallet as one entity, despite that being technically not how it works technologically. Because as many people have tried and failed to figure out over the years, laws are interpreted by juries and judges, not computers. Technological roadblocks are things they don't have any problems jumping over, and deliberately trying to add roadblocks like that with the imagination they're untouchable also tends to piss them off even more.

programmarchy 4y ago

If Tornado Cash could be banned, couldn't the same logic be used to ban Tor? The former obscures financial transactions, and the latter obscures communications, but there's a similar principle in play.

kibwen 4y ago
The US military itself uses Tor. They don't want to ban it, because even if the traffic on Tor is illicit, it still serves to mask the military's own traffic. Don't forget that Tor was originally developed by the US Navy.
- realce 4y ago
  I hear NK uses it too, it should probably be made devastatingly illegal therefore.
  - staringback 4y ago
    Most of HN actually thinks like this unfortunately
- bitxbitxbitcoin 4y ago
  I’d be willing to bet there is US government black budget money that moved over Tornado Cash, too. The issue then becomes that Tornado Cash wasn’t originally developed by the govt and whatever further implications that has.
- netheril96 4y ago
  That is the point of your parent comment: defeating their argument by their logic. To be logically consistent, the US should either ban both Tornado Cash and Tor or allow both.
- iotku 4y ago
  >The US military itself uses Tor. They don't want to ban it That's not really any reassurance in the long term, if they find a better/different solution that goes out the window.

yieldcrv 4y ago

This is the least spineless thing Brian Armstrong has ever publicly done And I think we should commend him for that since there really are consequences for his relationship with the government and Coinbase’s relationship with the government

roleplayer 4y ago

Missing from this conversation is the fact that TC was specifically designed to be able to prove your input/output if law enforcement requests it.

dannyw 4y ago
Also, TC took zero fees, had immutable smart contracts with no privileged roles or admin keys, etc, is open source. It is code.
capableweb 4y ago
I used Tornado Cash (non-US citizen here) for hiding transactions from the public (not hiding from the government), and when I filed my taxes, I still accounted for everything that is stored there + transacted via Tornado Cash, just like I do for my bank account. Appendix contained instructions for how they could access the proof of my transactions and accounts to verify themselves.
- zeusk 4y ago
  > I used Tornado Cash (non-US citizen here) for hiding transactions from the public (not hiding from the government) And how exactly does your bank account publish your transactions to the public?
  - capableweb 4y ago
    I think you misunderstand. Transactions happening on most blockchains are public, meaning if I send a transaction on the network, if others know my address, they know it was my transaction. Tornado Cash allows you to sever the tie between addresses on the Ethereum blockchain, so I don't have to have my transactions public, all while still being able to legally declare my taxes as if I didn't use Tornado Cash at all.

deleted 4y ago

[deleted]

SpicyLemonZest 4y ago

I think the crypto framing obscures the story here. If the government issued sanctions against a traditional financial organization engaged in money laundering, and then Goldman Sachs bankrolled a lawsuit arguing that the organization is allowed to engage in money laundering due to some quirk of the organizational structure, everyone would understand what's going on and nobody outside of the finance industry would be on the pro-lawsuit side.

dannyw 4y ago
The sanctioned entity here is a piece of code that uses zk-SNARK cryptography, in a permissionless and immutable way. There are no admin keys, there is no ownership, it is code. It's not an organization. This is more like the FBI banning GPG because terrorists use it. FTA: > They contend that the Treasury Department lacks the authority to restrict access to a software program. This is the point. No one would have batted an eye if OFAC sanctioned addresses that used TC to launder money. Nobody would have batted an eye if the FBI prosecuted criminals for using GPG to plot a crime. But what happened here is akin to the FBI, using powers that it hasn't been granted in law, to ban GPG.
- x86x87 4y ago
  Hahaha... you cannot make this thing up: https://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_investigation https://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_i...
- intrasight 4y ago
  Code has been, can be, and will be sanctioned. Will they be successful is a different question. The SEC is well-funded, has a strongly supported mandate, and has a long arm. They are playing a long war of attrition.
  - dannyw 4y ago
    the SEC isnt involved here .

helen___keller 4y ago

I kind of agree that Treasury should not have exactly this power to ban Tornado protocol. However, I believe Treasury certainly has the power to ban all transactions with networks hosting money laundering protocols. It would certainly be worse for crypto if it were illegal to buy sell ETH and friends because their networks host Tornado protocol. I see this attempt to moderate the network itself as “going easy” on crypto investors. The crux of the issue comes down to moderation. In a sufficiently large and complex network, moderation becomes a necessity not an option. This won’t be the last case. Regulators generally strike when sufficiently popular technology makes it sufficiently easy to perform sufficiently damaging illegal activity.

dannyw 4y ago
Moderation is generally not required under US law. For example, Section 230 of the Communications Decency Act provide safe harbor provisions: 'No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider'. It doesn't matter if I run a site with 10 users or 100 million users: the law's provisions and protections are the same. You are right that regulators generally strike when there is a critical mass. However, my 2c is that this is not backed by statue, and US Treasury does not have the right to sanction software code. They can certainly sanction users who use TC for money laundering, but code itself? That's like sanctioning PGP or end-to-end encryption...
- helen___keller 4y ago
  Sorry to be clear, I’m not claiming moderation is legally required, I’m claiming it effectively becomes necessary for a network to avoid stepping on landmines. For example, it’s impossible to run a social network website of 100 million users without users uploading illegal content. Moderation is a necessity to avoid being taken down by the feds for hosting illegal content. I agree that treasury doesn’t have the right to sanction code. They do have the right to ban exchanges from exchanging ETH. However, nobody wants that, so they’d rather try and extend their powers to effectively become ETH moderators.
4y ago

cdiddy2 4y ago

Tornado Cash has a great feature that you can use to prove the source of funds that were withdrawn from it as needed. This would allow exchanges to implement something where funds from Tornado could have to provide this proof before depositing. It could be fully compliant with both privacy and what exchanges/governments want. Coin Center does a great write up of it here, under "Compliance Tool" https://www.coincenter.org/education/advanced-topics/how-does-tornado-cash-work/ https://www.coincenter.org/education/advanced-topics/how-doe...

NelsonMinar 4y ago

Mixers never fail to astonish me. They are explicitly a product to facilitate money laundering. They are marketed as a way to wash illicit funds. And then the folks who run them get mad when law enforcement tries to shut them down?

cdiddy2 4y ago
They are explicitly a product for user privacy. Given that the depositor can prove the source of funds put into tornado cash via a zk-proof there is no reason that this should be shut down.
- ASalazarMX 4y ago
  > They are explicitly a product for user privacy That's the facade. In my experience, Bitcoin is still the main ecoin demanded in phishing/ransomware incidents, even when more privacy-friendly ecoins exist. A tumbler's purpose is distorting Bitcoin's public blockchain (one of its core tenets), and that's very attractive to criminals.
  - cdiddy2 4y ago
    Of course its attractive to criminals. Same reason they love cash. Doesn't mean that we should ban cash
    - JumpCrisscross 4y ago
      > Doesn't mean that we should ban cash Mixers aren’t banned. A mixer that was used to launder money by North Korea was.
      - Laaas 4y ago
        All decentralised (non-custodial) mixers could be used by North Korea. Should they all be banned?
      - cdiddy2 4y ago

tmpz22 4y ago

Can anyone defending Tornado Cash provide a concrete example of mixing crypto revenues in a way that is not clearly illegal? I've scrolled this whole thread, and there are a lot of people defending it, but none of them provided a full e2e example of "I sell x to y, y can only use crypto, y will be persecuted if I don't obscure my transactions from z, so therefore this is a good thing" Yes we can all do the hypothetical "dissident in AUTHORITARIAN_COUNTRY needs to buy x and will totally be persecuted otherwise" but I want an actual production example not a moral whataboutism.

bornfreddy 4y ago
From the article: > One plaintiff in the lawsuit is a crypto investor who used Tornado Cash to send funds to support the Ukrainian war effort, hoping to preserve his anonymity and avoid retaliation from the Russian government.
- tmpz22 4y ago
  Ok so a user who already has crypto and doesn't want to convert it first (fees) may be encouraged to mix it (privacy) and that is a legitimate usecase. That makes sense to me, though it seems like a very rare event that should not be the sole basis for the underlying platform. Also I should've read the full article first.
  - bornfreddy 4y ago
    Not sure how rare it is. There is lots of people who got crypto-rich. It is easier to donate money that came easily... I would assume making a nontrivial donation in fiat privately is also very difficult.
  - yieldcrv 4y ago
    > though it seems like a very rare event that should not be the sole basis for the underlying platform. not rare, 12,000+ unique users on just the ethereum network alone only a handful would be from large scale hacks, a bigger handful from phishing even the treasury's estimates were that less than 20% of use was illicit, it is a totally new standard to vilify it based on whatever it is vilified for https://dune.com/poma/tornado-cash_1 https://dune.com/poma/tornado-cash_1

letsgo39 4y ago

I just want to say, I find it very Orwellian that HN shuts down immediately any conversation about theft of IP through these 'archive.ph' links, and even removes the 'reply' button to ensure so. Just watch how quickly this comment will disappear or get downvoted.

dang 4y ago
(FWIW, users flagged your comment.) Could you please stop creating accounts for every few comments you post? We ban accounts that do that. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. You needn't use your real name, of course, but for HN to be a community, users need some identity for other users to relate to. Otherwise we may as well have no usernames and no community, and that would be a different kind of forum. https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix&page=0&query=community%20identity%20by:dang https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...

2OEH8eoCRo0 4y ago

Have your cake and eat it too. Files lawsuit to continue breaking the law. I suppose the lawsuit is a good thing. The government will have to defend their decision in court which will strengthen their position regardless.

siilats 4y ago

Look treasury can ban Bitcoin addresses and then make tumbler not accept incoming money from certain addresses. But if they haven’t done it they cannot go retroactively say tornado cash laundered North Korean money. If the address was obviously North Korean treasury should have banned it.

wollsmoth 4y ago

I think my crypto info is behind the times. Can someone explain to me why people don't just exchange crypto for monero and then back if they want to "wash" it?

chizhik-pyzhik 4y ago
Tornado is nice because you can stay entirely within the Ethereum blockchain- no need to involve a centralized entity like an exchange to facilitate this. It's also arguably more private than monero. Tornado uses zk math instead of coinjoin; tornado also sticks to only a few values (1 eth, 10 eth, 100 eth...) which minimizes traceability
martinko 4y ago
Generally you need to use a custodial exchange to do this, which creates a point of failure/censorship. Doing this onchain / trustlessly on protocols such as thor have significant liquidity limits afaik.
- wollsmoth 4y ago
  I thought you could use something like uniswap which should avoid that I think? Haven't tried myself.
from 4y ago
Changenow and Morphtoken have very high slippage when you get in the millions of dollars also these are (temporarily) custodial exchanges who could basically take your money and say GFY. Coins from these exchanges are tainted anyways so it doesn’t really make a difference from a laundering perspective along with the fact that the fees are higher.
LatteLazy 4y ago
This is effectively a test case for banning Monero etc. This is similar because it's just a tumbler, not a currency etc with a Tumbler built in.
- 4y ago

intrasight 4y ago

The "we are not a person or organization" argument sort of breaks down once you file a lawsuit.

chizhik-pyzhik 4y ago
The argument made by the plantiffs is that they were harmed by the Treasury Dept's action. One of the plantiffs deposited funds into Tornado for personal privacy, and now cannot legally access these funds. https://storage.courtlistener.com/recap/gov.uscourts.txwd.1188185/gov.uscourts.txwd.1188185.1.0.pdf https://storage.courtlistener.com/recap/gov.uscourts.txwd.11...
- null0pointer 4y ago
  Is it possible the court will just say "Plaintiffs get a one-time opportunity to declare the source of and withdraw their funds from the contract"? I don't know if this is the sort of thing a court can do but it seems like the obvious solution to eliminate the damages to the plaintiffs while keeping the sanction in place.
  - intrasight 4y ago
    That would be a good outcome
everfree 4y ago
Serious question: Why? The suit doesn't represent that Tornado Cash itself is a legal person, in fact it represents the opposite. "Tornado Cash" is not the plaintiff.

Animats 4y ago

Does TornadoCash still need people to run it? Or is it just contracts in the Etherium blockchain?

everfree 4y ago
The part that was blacklisted was just the contract addresses.
verdverm 4y ago
It is autonomous but relies on people to create liquidity

bruiseralmighty 4y ago

Hasn't precedent already been set for privacy protocols? I know the government tried to stop encryption by listing it as a munition, but they eventually lost that fight on first amendment grounds. It is hard to argue that code is not a kind of speech or expression and thus it gets some of the highest legal protection possible under U.S. law. Tornado Cash is just a coin mixer implemented through smart contracts yes? The 'coins' themselves already enjoy some first amendment protection by being built on top of the protected encryption protocols. The smart contract itself is just another communication protocol defined in code. So it seems patently obvious that TC is allowed to exist under U.S. law. The only remaining question is whether anyone can be allowed to use it. We actually have to get deep into first amendment jurisprudence to answer that question. Generally speaking all speech is permitted but, when it is paired with conduct, the conduct can be regulated by time, place, and manner. This at first appears a simple distinction for us. Users of TC or any e-coin standard are _conducting_ transactions. But this is thorny. Commerce used to be conducted entirely physically with an exchange of cash. Then it was done with an exchange of electronic funds on a banks balance sheet; essentially a change on two different excel spreadsheets. But the btc-protocol and its derivatives don't function like this. They use a ledger. When we transact in e-coins we don't exchange anything. No digital coins fly from my computer to yours or vice versa. Rather all that happens is a message is sent to a public server which contains enough information to allow that server to determine that we both agreed to send that specific message. The server then updates the ledger and publishes this change to other servers hosting the ledger so there is agreement that we exchanged value. It's not actually 100% clear that when communicating this way we have conducted anything. Sending encrypted messages like this has been determined to be first amendment protected activity as pure speech. Indeed we wouldn't have an internet today if it weren't. Having a message be encrypted inherently provides privacy and precludes restrictions on a message's content. Even when that message's content includes information to exchange value. Citizen's United also has some precedent over whether speech + conduct regarding money transactions are permitted speech when that speech is political in nature. This leaves us only with the few recognized non-speech categories with which to regulate pure speech: > lewd, obscene, or pornographic content; defamatory content; insulting or “fighting words”; expressive content that tends to inflict injury; speech that incites an immediate illegal conduct such as riot or violence; speech that poses an imminent threat to public safety or national security; false or misleading commercial advertising; and perjury. There are a few categories here that may help us. Inciting immediate illegal conduct and imminent threat to public or national security. To qualify as incitement to illegal or a threat to public safety the speech has to pass the 'clear and present danger' test. This test has two parts: * first, the speech must impose a threat that a substantive evil might follow * second, the threat is a real, imminent threat. This test is extremely hard to meet and just because the TC protocol is may be or even if it is likely to be used for money laundering it will likely never rise to the threshold of this test in a U.S. court. Cases where speech does meet this threat are specific threats or instructions. If TC included specific instructions on how to evade law enforcement then that may qualify. This leaves only threats to national security as a legal basis. We have to begin by saying that many of the use of national security as a means to restrict the rights of Americans has an extremely checkered past. These were the arguments that bullied journalists under the red scare, interned the Japanese in WWII, attempted to stifle the pentagon papers after the Vietnam War, maintained the patriot act of 2001, lead to secret courts with secret evidence, torture, suspension of habeas corpus, etc. However, the standards for what constitutes a threat to national security have been much degraded in the past two decades. You could probably convince a judge or even SCOTUS that the use of TC by foreign hostile powers like North Korea and its potential to be used as a tool of terrorism from the likes of Iran and ISIS constitute a threat to national security. But arguing this not only degrades your moral character, it is also unlikely to be effective in the long term. We did reinstate habeas corpus, we un-interned the Japanese, and we did publish the Pentagon papers. Hopefully we will also get rid of the Patriot Act in the coming decades. And even if TC was determined to be a threat to national security, that determination would likely one day be reversed as an understanding of the technology and its necessity aged into the judicial system.

ESTheComposer 4y ago

Love that a large chunk of negative sentiment comments here are from one private equities trader. Pretty telling imo. Anonymity is not a crime

intrasight 4y ago

> "Tornado Cash is not “property,” a “foreign country or a national thereof,” or a “person” of any kind under IEEPA." The president has much discretion here. That was the whole idea of IEEPA. I think the best case outcome of this lawsuit to crypto is that courts just toss it. Worse case is that IEEPA is effectively amended to say that a DAO is a person.

secondcoming 4y ago

Why can the NYT still use the term 'blacklist', when it has been purged from Software?

anotherrandom 4y ago
It hasn't been, it is still widely used. The fact that people outside of the software world are unaware of that even happening shows how few people actually hopped on board that train

colinsane 4y ago

cryptocurrency is a challenge to the state. Bitcoin’s first block quotes a news headline “Chancellor on brink of second bailout for banks” in order to establish the chain’s age. that message isn’t a mistake: Bitcoin emerged to challenge the state’s control over the monetary system. 13 years later we’re all caught up in surface-level details like “is this cryptocurrency thing a security” and “is this cryptocurrency mixer money laundering” meanwhile the basic premise/existence of cryptocurrency has been accepted de-facto. surface-level regulations just kick the can down the road. beneath that surface is still a massive challenge to the state, only more diffuse, and that interior shapes the surface much more than the other way around. governments need to make up their mind: are they OK with yielding control over the money system, or not? right now the answer looks like “yes, but we’re going to drag the process out”, which is sort of the worst thing for everyone. drawn-out wars hurt everyone. US ought to either ban cryptocurrency (private currencies) altogether, or step aside and let it happen.

HereIGoAgain 4y ago

More power to them. The idea that you shouldn't be able to use something because it CAN be used for crimes is repugnant and dangerous to a free and open democratic society. Plus this is all pretty much settled law is it not?

colinmhayes 4y ago
Tornado was used to launder something like a billion dollars by the north koreans. This is not a CAN be used for crimes situation. It was used to facilitate crimes.

psyfi 4y ago

Monero.