4 ms·

Here are Coincenter's arguments that OFAC actually has exceeded their authority: https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-ent

Here are Coincenter's arguments that OFAC actually has exceeded their authority: 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-...

buildbot 4y ago
Are they lawyers who specialize in Federal law and financial crime?
woodruffw 4y ago
The argument advanced here is perverse: you can’t erase the illegality of an action by making it autonomous. In other words: putting a brick on the car’s accelerator doesn’t absolve you when the car runs someone over — the law recognizes that a human or set of humans is the efficient cause of the crime, regardless of how much code (or steel) you obscure it with.
- notch656a 4y ago
  The entertaining thing here, though, is the creators of TC made the blueprint for a brick and then told a bunch of other people running ethereum virtual machines they they had a plan for a brick. Some initial gas fees were paid so the users would actually absorb the 'brick' program. Then the creator of TC stepped away. The node operators took the gas fees in exchange for putting the brick on their accelerator and validated the brick contracts. Who's to sanction here? Honestly the node operators running the Ethereum virtual machine 'car' look like the closest human to hold accountable, if that's the desirable outcome. Continuing our logic, ethereum should basically be shutdown if the runners of the brick program are to be held accountable, because that's basically every node.
  - woodruffw 4y ago
    This is a fantastic point, and (IMO) reveals the government’s actual intended strategy here. For better or worse, the government seems to be intent on making a lesson out of the Tornado Cash developer, rather than attempting (probably pointlessly) to shut down all of Ethereum. The point seems to be to send a message: if you publish the brick blueprint, you will be considered the entity responsible. This accomplishes both of the government’s goals: it disincentives future attempts to launder money through smart contracts, and it avoids a protracted legal and technical battle over individual cryptocurrencies and their networks. Edit: And there are clear parallels in existing legal reasoning: we do not prosecute steel factories for following a client’s specification faithfully, even if it’s later revealed that the specification was in furtherance of something illegal to manufacture (like an unregulated weapon). The exception is when the factory goes to unusual lengths to turn a blind eye, which the government might present evidence to argue negligence or conspiracy.
    - DennisP 4y ago
      In that case the government runs into First Amendment issues. Bernstein vs. US ruled that source code counts as protected speech, and courts do consider chilling effects to be infringement.
  - salawat 4y ago
    Technically speaking, every Ethereum node operator with that code is now potentially an unlicensed money transmitter, in violation of U.S. banking regulations. It'll really only take getting enough of the right ears to get this recognized. Make no mistake, it was never the intent of the United States Government to leave the door open to everyone to operate their own personal money transmitter. That's actually something I like about this to be honest. There really is no avoiding coming to terms with the fact that structurally speaking, the U.S. regulatory edifice outsources to private industry. All the typical "It's a private business, not the government" people need a reality check. This is how regulation works.
    - from 4y ago
      > Technically speaking, every Ethereum node operator with that code is now potentially an unlicensed money transmitter, in violation of U.S. banking regulations. Except Treasury has released guidance saying the opposite. Not sure what would make one so giddy about a mandatory and opaque financial surveillance apparatus being a part of daily life.
      - salawat 4y ago
        >Not sure what would make one so giddy about a mandatory and opaque financial surveillance apparatus being a part of daily life. The part where it becomes common knowledge and we actually have a more public discussion on whether it's a good idea in the long run. I actually feel quite squicky about the fact that most people don't seem to realize there's this orchestrated black hole capability strategically wielded with very little recourse by the Executive.
        notch656a 4y ago
        The sooner Americans realize they're basically all criminals, the better. The arbitrary and capricious selection of who to hold accountable for TC transactions is classic divide-and-conquer tactic. The 'honest' reader here should realize they aren't the 'good guy'. They're just someone a prosecutor hasn't found convenient to destroy yet.
- yieldcrv 4y ago
  Nobody is saying that, they’re saying the correct authority has to enforce the illegal action. The treasury and its OFAC list is not.
  - salawat 4y ago
    Treasury and OFAC absolutely are insofar as it can prove those addresses are connected to value streams tappable by North Korea, or anyone on the SDN.
  - woodruffw 4y ago
    The fact that TC is an autonomous program is central to their statutory argument. They advance two parallel justifications for the argument: * A separate division of the Treasury (FinCEN) makes a policy distinction between various groups of users/operations of transaction anonymization software. The authors concede that OFAC is not bound to this policy distinction. * OFAC's stated mission is to bring about a "positive change in behavior." They claim that this can't happen with an autonomous contract, neglecting that the entire point is to scare developers away from deploying and using these kinds of contracts (which is indeed, from the Treasury's perspective, a positive change). Later on, they make a separate argument that inclusion in the OFAC list exceeds statutory authority under IEEPA. The claim there also relies on autonomy: that the "Tornado Cash Entity" is not meaningfully an operator of the "Tornado Cash Application," because the former cannot cease operation of the latter. This splits an exceedingly fine hair: it requires the Treasury to accept that the Tornado Cash Entity, despite being the prime mover for the Tornado Cash Application, is somehow not responsible for the thing it wrought. In other words, the "brick on the accelerator" argument. Later, there's some more plausible hair splitting over whether the term "property" correctly applies, despite there being little to no disagreement over whether North Korea actually did launder a bunch of money through the Tornado Cash Application. So it comes down to whether the Treasury (and a jury) can be convinced that being the prime mover somehow does not matter.
    - tonyarkles 4y ago
      > This splits an exceedingly fine hair: it requires the Treasury to accept that the Tornado Cash Entity, despite being the prime mover for the Tornado Cash Application, is somehow not responsible for the thing it wrought. In other words, the "brick on the accelerator" argument. I’m with you here. If I build a machine with no off switch that kills anyone who approaches it, even though it’s now completely out of my control… there’s a pretty clear connection between me and my creation. I have a feeling that people are going to be disappointed when “I built this autonomous thing and because I have no control over it I can’t be held responsible for it” is actually interpreted by the courts as “you built it and are responsible for every crime it commits”
- miracle2k 4y ago
  The argument is that the sanctions authority granted by Congress to Treasury is limited to persons and entities, and the Tornado Cash smart contracts are neither, nor the property of either.
  - woodruffw 4y ago
    I think my response to 'yieldcrv addresses this. TL;DR: Nobody thinks that the Tornado Cash smart contracts are themselves persons. The government is clearly operating along the reasoning that a human being had to be (and was, in fact) in the loop as part of deploying the smart contracts. That brings us back to the initial analogy I used: you can't absolve yourself by building a robot that does the crime for you.
    - miracle2k 4y ago
      > you can't absolve yourself by building a robot that does the crime for you. But the argument isn't at all about absolving the robot builder. In fact, they explicitly take no view on whether the sanctions against the Tornado Cash entity are justified. They also do not take a view on whether the government would be justified in prosecuting the individuals behind Tornado Cash. They are saying the government does not have the statutory authority to sanction the robot you built.
      - woodruffw 4y ago
        That's not what they're saying. They're saying the government doesn't have the statutory authority to sanction the entity that built the robot. This is the entire point of their extended digression on the "Tornado Cash Entity" versus the "Tornado Cash Application." (Defending the TCE also continues below that, on a mostly irrelevant and unargued tangent about software IP.)
        miracle2k 4y ago
        From the post: "So there is potentially an entity called Tornado Cash that is controlled by certain individuals, and the web address and some of the Ethereum addresses in the notice can be thought of as either pseudonyms for that entity or, alternatively, as its property. At this point, we’re not offering an opinion on whether it was appropriate to sanction that entity—we do not know all the facts that have led to this action—but we would agree that there may be an entity behind those donation addresses and that said entity may be legally eligible for listing. "
nl 4y ago
Neither of these people are lawyers, and their interpretation of the law has roughly as much validity as a HN comment on the law: sounds good, probably wrong.
- salawat 4y ago
  The IANAL caveat always applies, but I also counter with "one would be dumb to think the Government would throw up their hands at having been thwarted by this one weird trick. The obligatory reference to rubber hose cryptanalysis is always something to keep in mind.

buildbot 4y ago

Are they lawyers who specialize in Federal law and financial crime?

woodruffw 4y ago

The argument advanced here is perverse: you can’t erase the illegality of an action by making it autonomous. In other words: putting a brick on the car’s accelerator doesn’t absolve you when the car runs someone over — the law recognizes that a human or set of humans is the efficient cause of the crime, regardless of how much code (or steel) you obscure it with.

notch656a 4y ago
The entertaining thing here, though, is the creators of TC made the blueprint for a brick and then told a bunch of other people running ethereum virtual machines they they had a plan for a brick. Some initial gas fees were paid so the users would actually absorb the 'brick' program. Then the creator of TC stepped away. The node operators took the gas fees in exchange for putting the brick on their accelerator and validated the brick contracts. Who's to sanction here? Honestly the node operators running the Ethereum virtual machine 'car' look like the closest human to hold accountable, if that's the desirable outcome. Continuing our logic, ethereum should basically be shutdown if the runners of the brick program are to be held accountable, because that's basically every node.
- woodruffw 4y ago
  This is a fantastic point, and (IMO) reveals the government’s actual intended strategy here. For better or worse, the government seems to be intent on making a lesson out of the Tornado Cash developer, rather than attempting (probably pointlessly) to shut down all of Ethereum. The point seems to be to send a message: if you publish the brick blueprint, you will be considered the entity responsible. This accomplishes both of the government’s goals: it disincentives future attempts to launder money through smart contracts, and it avoids a protracted legal and technical battle over individual cryptocurrencies and their networks. Edit: And there are clear parallels in existing legal reasoning: we do not prosecute steel factories for following a client’s specification faithfully, even if it’s later revealed that the specification was in furtherance of something illegal to manufacture (like an unregulated weapon). The exception is when the factory goes to unusual lengths to turn a blind eye, which the government might present evidence to argue negligence or conspiracy.
  - DennisP 4y ago
    In that case the government runs into First Amendment issues. Bernstein vs. US ruled that source code counts as protected speech, and courts do consider chilling effects to be infringement.
- salawat 4y ago
  Technically speaking, every Ethereum node operator with that code is now potentially an unlicensed money transmitter, in violation of U.S. banking regulations. It'll really only take getting enough of the right ears to get this recognized. Make no mistake, it was never the intent of the United States Government to leave the door open to everyone to operate their own personal money transmitter. That's actually something I like about this to be honest. There really is no avoiding coming to terms with the fact that structurally speaking, the U.S. regulatory edifice outsources to private industry. All the typical "It's a private business, not the government" people need a reality check. This is how regulation works.
  - from 4y ago
    > Technically speaking, every Ethereum node operator with that code is now potentially an unlicensed money transmitter, in violation of U.S. banking regulations. Except Treasury has released guidance saying the opposite. Not sure what would make one so giddy about a mandatory and opaque financial surveillance apparatus being a part of daily life.
    - salawat 4y ago
      >Not sure what would make one so giddy about a mandatory and opaque financial surveillance apparatus being a part of daily life. The part where it becomes common knowledge and we actually have a more public discussion on whether it's a good idea in the long run. I actually feel quite squicky about the fact that most people don't seem to realize there's this orchestrated black hole capability strategically wielded with very little recourse by the Executive.
      - notch656a 4y ago
        The sooner Americans realize they're basically all criminals, the better. The arbitrary and capricious selection of who to hold accountable for TC transactions is classic divide-and-conquer tactic. The 'honest' reader here should realize they aren't the 'good guy'. They're just someone a prosecutor hasn't found convenient to destroy yet.
yieldcrv 4y ago
Nobody is saying that, they’re saying the correct authority has to enforce the illegal action. The treasury and its OFAC list is not.
- salawat 4y ago
  Treasury and OFAC absolutely are insofar as it can prove those addresses are connected to value streams tappable by North Korea, or anyone on the SDN.
- woodruffw 4y ago
  The fact that TC is an autonomous program is central to their statutory argument. They advance two parallel justifications for the argument: * A separate division of the Treasury (FinCEN) makes a policy distinction between various groups of users/operations of transaction anonymization software. The authors concede that OFAC is not bound to this policy distinction. * OFAC's stated mission is to bring about a "positive change in behavior." They claim that this can't happen with an autonomous contract, neglecting that the entire point is to scare developers away from deploying and using these kinds of contracts (which is indeed, from the Treasury's perspective, a positive change). Later on, they make a separate argument that inclusion in the OFAC list exceeds statutory authority under IEEPA. The claim there also relies on autonomy: that the "Tornado Cash Entity" is not meaningfully an operator of the "Tornado Cash Application," because the former cannot cease operation of the latter. This splits an exceedingly fine hair: it requires the Treasury to accept that the Tornado Cash Entity, despite being the prime mover for the Tornado Cash Application, is somehow not responsible for the thing it wrought. In other words, the "brick on the accelerator" argument. Later, there's some more plausible hair splitting over whether the term "property" correctly applies, despite there being little to no disagreement over whether North Korea actually did launder a bunch of money through the Tornado Cash Application. So it comes down to whether the Treasury (and a jury) can be convinced that being the prime mover somehow does not matter.
  - tonyarkles 4y ago
    > This splits an exceedingly fine hair: it requires the Treasury to accept that the Tornado Cash Entity, despite being the prime mover for the Tornado Cash Application, is somehow not responsible for the thing it wrought. In other words, the "brick on the accelerator" argument. I’m with you here. If I build a machine with no off switch that kills anyone who approaches it, even though it’s now completely out of my control… there’s a pretty clear connection between me and my creation. I have a feeling that people are going to be disappointed when “I built this autonomous thing and because I have no control over it I can’t be held responsible for it” is actually interpreted by the courts as “you built it and are responsible for every crime it commits”
miracle2k 4y ago
The argument is that the sanctions authority granted by Congress to Treasury is limited to persons and entities, and the Tornado Cash smart contracts are neither, nor the property of either.
- woodruffw 4y ago
  I think my response to 'yieldcrv addresses this. TL;DR: Nobody thinks that the Tornado Cash smart contracts are themselves persons. The government is clearly operating along the reasoning that a human being had to be (and was, in fact) in the loop as part of deploying the smart contracts. That brings us back to the initial analogy I used: you can't absolve yourself by building a robot that does the crime for you.
  - miracle2k 4y ago
    > you can't absolve yourself by building a robot that does the crime for you. But the argument isn't at all about absolving the robot builder. In fact, they explicitly take no view on whether the sanctions against the Tornado Cash entity are justified. They also do not take a view on whether the government would be justified in prosecuting the individuals behind Tornado Cash. They are saying the government does not have the statutory authority to sanction the robot you built.
    - woodruffw 4y ago
      That's not what they're saying. They're saying the government doesn't have the statutory authority to sanction the entity that built the robot. This is the entire point of their extended digression on the "Tornado Cash Entity" versus the "Tornado Cash Application." (Defending the TCE also continues below that, on a mostly irrelevant and unargued tangent about software IP.)
      - miracle2k 4y ago
        From the post: "So there is potentially an entity called Tornado Cash that is controlled by certain individuals, and the web address and some of the Ethereum addresses in the notice can be thought of as either pseudonyms for that entity or, alternatively, as its property. At this point, we’re not offering an opinion on whether it was appropriate to sanction that entity—we do not know all the facts that have led to this action—but we would agree that there may be an entity behind those donation addresses and that said entity may be legally eligible for listing. "

nl 4y ago

Neither of these people are lawyers, and their interpretation of the law has roughly as much validity as a HN comment on the law: sounds good, probably wrong.

salawat 4y ago
The IANAL caveat always applies, but I also counter with "one would be dumb to think the Government would throw up their hands at having been thwarted by this one weird trick. The obligatory reference to rubber hose cryptanalysis is always something to keep in mind.