The shutdown of crypto mixing service Samourai Wallet and the arrest of its founders are significant events with implications for the industry. Cointelegraph Research delves into the workings of Samourai Wallet, the reasons behind the U.S. authorities’ actions, and the potential impact on privacy and self-custodial crypto tools.
The founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, were arrested on charges of money laundering and operating an unlicensed money service business. Rodriguez, the CEO, pleaded not guilty and was released on a $1 million bond, while Hill, the CTO, is awaiting extradition from Portugal.
Samourai Wallet distinguished itself with privacy-enhancing features like Ricochet and Whirlpool, a version of CoinJoin. These features allowed users to obscure transaction details and enhance privacy. However, the FBI’s warning against unregistered money services businesses may indicate future regulatory changes for non-custodial crypto tools.
The accusations against Samourai Wallet revolve around the operation of an unlicensed money transmitting business. Despite being a self-custodial wallet, Samourai could have controlled funds and transactions through its CoinJoin service, potentially violating U.S. laws. The legal implications of profit generation from the CoinJoin service are crucial, as they may determine the status of the business as a money transmitter.
Aside from money transmitting charges, the founders are also facing allegations of money laundering, which could lead to lengthy prison sentences. The indictment suggests that Samourai Wallet’s founders were aware of illicit activities on their platform, even though they did not directly conduct financial transactions. The prosecution’s efforts to extend legal responsibility to non-custodial products signal a broader crackdown on crypto businesses.
The case highlights the complex legal landscape surrounding crypto businesses and the challenges they face in navigating regulations. While the distribution of privacy tools is protected by the First Amendment, the deployment of server infrastructure and involvement in illicit activities could expose non-custodial providers to legal action. As the industry evolves, regulatory clarity will be essential to ensure compliance and innovation in the crypto space.