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It's a felony to use Tornado Cash now. And the government interprets sanctions law extraterritorially so you're not safe in other countries either.

by from 3y ago

ETH_start 3y ago
The sanctions are being challenged in court. A federal agency prohibiting use of what is nothing but software is totally unconstitutional, and amounts to a total abrogation of internet freedom, done without any public process like legislation. It also amounts to a general criminalization of financial privacy. So hopefully the legal challenge succeeds.
- deleted 3y ago
  [deleted]
- inlined 3y ago
  What part of the constitution prohibits banning software?
  - ETH_start 3y ago
    The First Amendment.
    - acdha 3y ago
      That covers you publishing software. It doesn’t cover providing a service to criminals and personally profiting from it, and the constitution definitely gives the government authority to police that so it’s going to come down to how well they can prove that those guys were going more than just releasing code.
      - wombatpm 3y ago
        Interstate commerce clause
      - ETH_start 3y ago
        The tornado cash smart contracts simply encrypt your transaction. When you use it you are not profiting off of it. It would be akin to banning. The use of communication encryption protocol period this is completely unprecedented in the US.
        acdha 3y ago
        That's not accurate: my choice to encrypt a message does not directly assist you in committing a crime but that is unavoidably true for using a mixer. The guy who was arrested wasn't just arrested because he released something on GitHub but because he operates a service with North Korea used to launder money and received payment for it, and it's the operations part which brings the most risk — that service isn't complying with legal requirements for record keeping and since it's not free to use, that means that there's a transaction record showing the operators receiving a non-trivial sum of money from a criminal group. That last part is potentially defensible – bankers aren't charged just because a criminal stores money in a checking account – except that each KYC law not followed is not only its own offense but also a chance for prosecutors to argue that the decision not to do so was intentional and the operators knew their service was predominantly used by criminals. That's going to be an interesting case with potentially significant implications for the entire field.
        ETH_start 3y ago
        1. Your choice to encrypt metadata can in fact make it more difficult to identify criminal correspondents. Your choice to use Tor similarly makes it more difficult to track criminals' web usage. Both of these help criminals to engage in certain nefarious actions. To generalize, every user of a privacy protocol increases the protocol's anonymity set, and thus its utility to all users. In other words, Tornado Cash shares this property with every other privacy protocol. 2. The guy who wrote the Tornado Cash code operated no aspect of the Tornado Cash smart contract. That operates entirely autonomously. It's code, deployed to a massively distributed blockchain, that any one can use to encrypt their transaction.
        acdha 3y ago
    - polygamous_bat 3y ago
      Indeed, which is why you can get the Tornado source code off of github: https://github.com/tornado-repositories https://github.com/tornado-repositories However, actually running the code to facilitate North Korean hackers launder money and personally profiting off of it? That's not covered by the first amendment, and I sincerely urge you to not try to find that out in the hard way.
      - miracle2k 3y ago
        > However, actually running the code to facilitate North Korean hackers launder money and personally profiting off of it? Who is "running" the code? The US government, to this date, has not made an argument that the developers of Tornado Cash, who have deployed the code to the Network, have committed a crime; at least one of them seems to be living in the US. Nor has the government made an argument that operators of Ethereum nodes are committing a crime; they might also be considered to be running the code. What the government has done is, through sanctions, instituted restrictions on Americans interacting financially with the smart contract. This has nothing to do with "running code"; this is operating under the assumption that the Tornado Cash smart contracts are an entity that is party to financial transactions. Whether they have the power to sanctions non-entities like a smart contract is what the suit intends to find out.
        Daviey 3y ago
        The validating nodes "run" the code. And the majority of the nodes now won't process a tx to or from Tornado[0]. [0] https://www.trustnodes.com/2022/12/14/70-of-the-ethereum-network-now-censoring https://www.trustnodes.com/2022/12/14/70-of-the-ethereum-net...
        miracle2k 3y ago
        The number is actually 30% now (and seemingly more like 20% since yesterday's Shanghai for some reason): https://www.mevwatch.info/ https://www.mevwatch.info/
      - ETH_start 3y ago
  - deleted 3y ago
    [deleted]
miracle2k 3y ago
> And the government interprets sanctions law extraterritorially so you're not safe in other countries either. It does not; these sanctions only apply to US Persons. Secondary sanctions mean that the Treasury can additional designate non US-Persons for breaches of the primary sanctions, but that is a heavy-handed tool and unlikely to happen to people who merely use Tornado Cash; regardless, no law was broken by such a person.
- from 3y ago
  Turkish guy accused of violating sanctions on Iran (no US bank account, only US nexus was that some of the banks he used had correspondent accounts with New York banks): https://www.paulhastings.com/insights/client-alerts/united-states-of-america-v-reza-zarrab-the-long-reach-of-us-sanctions-may-have-just-gotten-longer https://www.paulhastings.com/insights/client-alerts/united-s... Lebanese man extradited from Morocco for violating sanctions on himself (!): see ruling justifying this on https://casetext.com/case/united-states-v-tajideen-1 https://casetext.com/case/united-states-v-tajideen-1 It is trivial for the government to say that you directly or indirectly used some service operated by American company and therefore you are subject to American jurisdiction. Yes it’s unlikely to happen to any small time Tornado Cash user.

It's a felony to use Tornado Cash now. And the government interprets sanctions law extraterritorially so you're not safe in other countries either.

by from 3y ago

It's a felony to use Tornado Cash now. And the government interprets sanctions law extraterritorially so you're not safe in other countries either.

ETH_start 3y ago

The sanctions are being challenged in court. A federal agency prohibiting use of what is nothing but software is totally unconstitutional, and amounts to a total abrogation of internet freedom, done without any public process like legislation. It also amounts to a general criminalization of financial privacy. So hopefully the legal challenge succeeds.

deleted 3y ago
[deleted]
inlined 3y ago
What part of the constitution prohibits banning software?
- ETH_start 3y ago
  The First Amendment.
  - acdha 3y ago
    That covers you publishing software. It doesn’t cover providing a service to criminals and personally profiting from it, and the constitution definitely gives the government authority to police that so it’s going to come down to how well they can prove that those guys were going more than just releasing code.
    - wombatpm 3y ago
      Interstate commerce clause
    - ETH_start 3y ago
      The tornado cash smart contracts simply encrypt your transaction. When you use it you are not profiting off of it. It would be akin to banning. The use of communication encryption protocol period this is completely unprecedented in the US.
      - acdha 3y ago
        That's not accurate: my choice to encrypt a message does not directly assist you in committing a crime but that is unavoidably true for using a mixer. The guy who was arrested wasn't just arrested because he released something on GitHub but because he operates a service with North Korea used to launder money and received payment for it, and it's the operations part which brings the most risk — that service isn't complying with legal requirements for record keeping and since it's not free to use, that means that there's a transaction record showing the operators receiving a non-trivial sum of money from a criminal group. That last part is potentially defensible – bankers aren't charged just because a criminal stores money in a checking account – except that each KYC law not followed is not only its own offense but also a chance for prosecutors to argue that the decision not to do so was intentional and the operators knew their service was predominantly used by criminals. That's going to be an interesting case with potentially significant implications for the entire field.
        ETH_start 3y ago
        1. Your choice to encrypt metadata can in fact make it more difficult to identify criminal correspondents. Your choice to use Tor similarly makes it more difficult to track criminals' web usage. Both of these help criminals to engage in certain nefarious actions. To generalize, every user of a privacy protocol increases the protocol's anonymity set, and thus its utility to all users. In other words, Tornado Cash shares this property with every other privacy protocol. 2. The guy who wrote the Tornado Cash code operated no aspect of the Tornado Cash smart contract. That operates entirely autonomously. It's code, deployed to a massively distributed blockchain, that any one can use to encrypt their transaction.
        acdha 3y ago
  - polygamous_bat 3y ago
    Indeed, which is why you can get the Tornado source code off of github: https://github.com/tornado-repositories https://github.com/tornado-repositories However, actually running the code to facilitate North Korean hackers launder money and personally profiting off of it? That's not covered by the first amendment, and I sincerely urge you to not try to find that out in the hard way.
    - miracle2k 3y ago
      > However, actually running the code to facilitate North Korean hackers launder money and personally profiting off of it? Who is "running" the code? The US government, to this date, has not made an argument that the developers of Tornado Cash, who have deployed the code to the Network, have committed a crime; at least one of them seems to be living in the US. Nor has the government made an argument that operators of Ethereum nodes are committing a crime; they might also be considered to be running the code. What the government has done is, through sanctions, instituted restrictions on Americans interacting financially with the smart contract. This has nothing to do with "running code"; this is operating under the assumption that the Tornado Cash smart contracts are an entity that is party to financial transactions. Whether they have the power to sanctions non-entities like a smart contract is what the suit intends to find out.
      - Daviey 3y ago
        The validating nodes "run" the code. And the majority of the nodes now won't process a tx to or from Tornado[0]. [0] https://www.trustnodes.com/2022/12/14/70-of-the-ethereum-network-now-censoring https://www.trustnodes.com/2022/12/14/70-of-the-ethereum-net...
        miracle2k 3y ago
        The number is actually 30% now (and seemingly more like 20% since yesterday's Shanghai for some reason): https://www.mevwatch.info/ https://www.mevwatch.info/
    - ETH_start 3y ago
- deleted 3y ago
  [deleted]

miracle2k 3y ago

> And the government interprets sanctions law extraterritorially so you're not safe in other countries either. It does not; these sanctions only apply to US Persons. Secondary sanctions mean that the Treasury can additional designate non US-Persons for breaches of the primary sanctions, but that is a heavy-handed tool and unlikely to happen to people who merely use Tornado Cash; regardless, no law was broken by such a person.

from 3y ago
Turkish guy accused of violating sanctions on Iran (no US bank account, only US nexus was that some of the banks he used had correspondent accounts with New York banks): https://www.paulhastings.com/insights/client-alerts/united-states-of-america-v-reza-zarrab-the-long-reach-of-us-sanctions-may-have-just-gotten-longer https://www.paulhastings.com/insights/client-alerts/united-s... Lebanese man extradited from Morocco for violating sanctions on himself (!): see ruling justifying this on https://casetext.com/case/united-states-v-tajideen-1 https://casetext.com/case/united-states-v-tajideen-1 It is trivial for the government to say that you directly or indirectly used some service operated by American company and therefore you are subject to American jurisdiction. Yes it’s unlikely to happen to any small time Tornado Cash user.