Feds Bust Crypto Mixing Service: Samourai Founders Accused of Laundering Millions

April 25, 2024
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The founders of Samourai Wallet, a popular privacy-centric Bitcoin wallet, are embroiled in legal trouble as federal prosecutors charge them with serious offenses related to money laundering and operating an unlicensed money-transmitting business.

“Keonne Rodriguez and William Lonergan Hill Are Charged with Operating Samourai Wallet, an Unlicensed Money Transmitting Business That Executed Over $2 Billion in Unlawful Transactions and Laundered Over $100 Million in Criminal Proceeds,” the U.S. Attorney’s Office in the Southern District of New York announced in a press release Wednesday.

The Allegations

Keonne Rodriguez and William Lonergan Hill, the brains behind Samourai Wallet, are accused of conspiring to commit money laundering and operating their business without the appropriate licenses. These allegations arise from their alleged involvement in facilitating illicit transactions and laundering funds through their cryptocurrency mixing service, which purportedly handled over $100 million in transactions from illegal dark web markets.

The Charges

Prosecutors assert that the founders knowingly participated in a scheme to launder criminal proceeds by mixing illicit funds with legitimate ones. They reportedly earned around $4.5 million in fees for providing their mixing services. Samourai Wallet allegedly operated without the necessary licenses, violating U.S. regulations governing money transmission services.

Legal Ramifications

If found guilty, Rodriguez and Hill face substantial penalties:

  • Rodriguez: Arrested in Pennsylvania, Rodriguez awaits arraignment and could potentially face a maximum sentence of 20 years for conspiracy to commit money laundering.
  • Hill: As the Chief Technology Officer of Samourai Wallet, Hill was apprehended in Portugal and will be extradited to the U.S. His charges carry a maximum sentence of five years for operating an unlicensed money-transmitting business.

Ki Young Ju, a Bitcoin On-Chain Analyst and Founder of Crypto Quant, slammed the DOJ, saying, “The US DOJ has arrested pioneers in Bitcoin privacy technology. Privacy stands as a core value of Bitcoin. Mixing itself is not a crime. Even crypto exchanges use mixing to safeguard user privacy. It’s like punishing the inventor of the knife instead of the one who uses it.”

Broader Context and Precedents

These charges against Rodriguez and Hill are part of a broader governmental crackdown on cryptocurrency privacy tools. Recent successful prosecutions, such as that of Roman Sterlingov, operator of the crypto mixer Bitcoin Fog, on money laundering charges, underscore the seriousness with which authorities are approaching such cases.

Furthermore, the Department of Justice is gearing up for an impending trial against Roman Storm, a developer and co-founder of the crypto mixing service, Tornado Cash.

Prosecutors allege that Storm, along with fellow developers Roman Semenov and Alexey Pertsev, facilitated over $1 billion in money laundering through their work building Tornado Cash. Notably, some of these funds were allegedly laundered for North Korea’s Lazarus Group.

Conclusively, the legal actions taken against the founders of Samourai Wallet signify the government’s concerted efforts to regulate crypto mixing services and combat illicit financial activities within the digital asset world.

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