Introduction to the Samourai Wallet Case
The Samourai Wallet case has taken a surprising turn, with the company’s lawyers alleging that federal prosecutors withheld crucial information. This information could have changed the course of the case, which involves the company’s co-founders, Keonne Rodriguez and William Hill, being charged with operating an unlicensed money transmitting business and money laundering conspiracy.
Background of the Case
In February 2024, prosecutors charged Rodriguez and Hill, unsealing the charges and arresting the pair in April that year. The government alleged that Samourai’s mixing service, which took crypto from multiple users and blended it together to hide its origins, helped with over $2 billion in illegal transactions and facilitated over $100 million worth of money laundering transactions from online black markets and scammers. Both Rodriguez and Hill pleaded not guilty.
The Allegation of Withheld Information
The lawyers for Rodriguez and Hill claim that prosecutors were in discussions with the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) about Samourai six months before the charges were filed. According to these discussions, FinCEN representatives stated that under their guidance, the Samourai Wallet app would not qualify as a ‘Money Services Business’ requiring a FinCEN license. This information was not disclosed to the defendants until April 1, 2025, more than a year after the charges were filed.
Details of the FinCEN Discussion
The discussion with FinCEN involved Kevin O’Connor, chief of FinCEN’s Virtual Assets and Emerging Technology Section, and Policy Division staffer Lorena Valente. An email summarizing the call noted that because Samourai does not take ‘custody’ of the cryptocurrency by possessing the private keys to any addresses where the cryptocurrency is stored, it would strongly suggest that Samourai is NOT acting as an MSB (money services business). The email also mentioned that FinCEN did not have a clear sense of what it would decide on Samourai and that arguing Samourai functionally controlled the crypto could be difficult.
Request for a Hearing and Potential Dismissal
Rodriguez and Hill’s lawyers have asked the court for a hearing to determine the circumstances surrounding the government’s late disclosure and to administer a remedy. They also intend to renew their bid to dismiss the charges, arguing that the defendants lacked fair notice and understood they were acting lawfully. This decision is based on the latest information and the Justice Department’s recent rollback of its crypto enforcement policies.
Potential Impact of the Justice Department’s Memo
In an April 7 memo, Deputy Attorney General Todd Blanche stated that the Justice Department wouldn’t prosecute crypto mixers for "unwitting violations of regulations." If the government decides to push forward with the case despite this memo, Rodriguez and Hill’s lawyers will bid to dismiss the charges. They argue that if Samourai is not considered a money transmitter under FinCEN’s guidance, then the co-founders could not be prosecuted for not having a license.
Conclusion
The Samourai Wallet case highlights the complexities and evolving nature of cryptocurrency regulations. The allegations of withheld information and the potential impact of the Justice Department’s memo on crypto enforcement add layers to the case. As the legal battle unfolds, it will be crucial to watch how the court handles the request for a hearing and the potential dismissal of the charges. The outcome could have significant implications for the future of cryptocurrency mixing services and the interpretation of financial regulations in the digital asset space.
