Celebrities' wallets have no power to decline transfers from Tornado Cash

News and Media
#1

So the government began cracking down on addresses associated with mixers

Someone got the bright idea of sending money to wallet addresses of celebrities and well-known people. Now by the letter of the law, all those addresses would have to be blocked by exchanges, too:

This highlights a major disconnect between the permissionless nature of Web3, where developers write code and people choose to use it, or not. It also highlights major issues governments have with encryption and obfuscation:

By taking the source code down from GitHub, the government is possibly violating the First Amendment rights of developers:

But that doesn’t change much, since the code can be shared in other ways. The last time the US Government went after encryption, it was regulated as munitions, which could not be exported without a license. Phil Zimmerman published all the source code in a book, which was allowed to be exported because of First Amendment protections:

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#2

The language chosen by OFAC in the Tornado article is intentionally VERY broad and leaves much open to interpretation. Essentially, owning over 50% of ANY ENTITY allows your wallet to be blocked if OFAC unilaterally adds you to their Blocked Persons List. The more blatant overreach appears later in the article, where OFAC claims their authority to block wallets extends to domestic owners, outside their mandate of Foreign Asset Control.

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#3

The plot thickens! Arresting developers of software… let’s see this play out in court. I am sure they will bring other charges than “you wrote and released the code”. They’re claiming that the developers specifically wrote the code for nefarious clients to begin with:

In the USA, we have a precedent already, it would seem, that merely writing code:

But you never know whether the US Supreme Court may overturn previous rulings:

And the government has been at times hostile to encryption:

Whatever the case, cryptographic signatures are normally not considered bad by practically any governments. It’s the encryption, and permissionless posting of information. The United States has some of the most robust freedoms of speech of any country on Earth, which even its critics acknowledge:

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#4

It appears as though OFAC is using it’s Authority to Freeze All Assets without specifically knowing if the individual Assets by all players are being used nefariously. They should have to prove within a certain amount of time whether individual asset holders on the Tornado platform are actually involved in the crime of money laundering versus assuming those assets may be involved in a money laundering scheme. Similar to when they detain you at an airport for questioning…they just can’t assume everyone on a flight is involved with a group of criminals who just so happen to be on a plane. They have a limited amount of time they can detain you or they will be subject to holding you illegally. There should also be a time limit on freezing individual Assets as well. Otherwise governments will be subject to doing what Canada did when they froze all Crypto Assets in Canada…assuming they were involved in giving money to truckers who had broken the law…before they had proved whether the individual trucker involved had even violated any laws.

Milk Road writers summed up the Moral to the Story as follows:

“Tornado Cash Post Ban Update: Tornado deleted their discord. The DAO has been shut down. And the lead dev has been arrested. Yet somehow, the founders of Celsius, Terra, and Voyager are still rich & walking around freely. The lesson: you can lie/cheat/steal… you just can’t give people tools that give them privacy!”

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#5

The governments and their agencies hide the information about the who, what and how they know. The charge are broad enough that they could encompass simply building and releasing code, which is quite worrying.

If governments want transparency from the people, why can’t the people demand transparency from the governments? What exactly happened, what are they charging him with? Do we just have to “trust them” when they have secret courts etc?

When it comes to wars, governments and politicians mess things up “royally” by having closed-door meetings. A lot of problent can be avoided if government was transparent too. As it is, the only really transparent things are smart contracts on blockchains.

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#6

Update:

This is what Phil Zimmerman had to say in 2021:

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#7

Really got into the article on Phil Zimmermann and pretty good privacy. Gonna dig into this a little bit more. Interesting to see how they’re going to Unscramble and put this back into Pandora’s Box.

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#8

I don’t think it would be easy to

It’s important to note that Alexey Pertsev worked with the FSB-linked entity before he started contributing to Tornado Cash. He must stay in jail for 3 months because of investigations about his engagement in espionage while contracting for the FSB during his time at Digital Security OOO.

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#9

Yes, and even more, as a person who breaks the OFAC sanctions is regarded as a criminal offender who may face monetary fines—ranging from a few thousand dollars to several million—and prison time of up to 30 years, according to Dow Jones.

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