Co-Founders of Bitcoin Mixers Samourai Wallet and Tornado Cash Plead Guilty to Money Laundering Conspiracy
The co-founders of popular Bitcoin mixing services
Samourai Wallet and Tornado Cash have entered pleas of guilty to conspiracy charges related to operating unlicensed money transmitting businesses.
Samourai Wallet Pleas
Keonne Rodriguez and William Lonergan Hill, founders of Samourai Wallet,
pleaded guilty in U.S. court on Wednesday. They will be sentenced in November.
The pleas do not constitute admissions of guilt on a separate money laundering charge.
Broader Legal Context
The pleas occur just as closing arguments finished in the separate trial
of Roman Storm, co-founder of Tornado Cash, who faces similar conspiracy charges.
Crypto Privacy Under Scrutiny
Charges and Concerns
Roman Storm faces conspiracy charges for money laundering
and operating an unlicensed money transmitting business,
with an additional conspiracy charge for violating U.S. sanctions,
carrying a potential 40-year sentence.
The prosecutions provoke alarm among cryptocurrency advocates
who warn of threats to financial and technological privacy rights.
They fear convictions could establish precedent for criminal liability
against developers of privacy-enhancing crypto software.
Samourai Wallet’s Functionality
Mixing Features and Volume
Samourai Wallet, launched in 2015 and subsequently removed from Google Play,
offered privacy features like Ricochet (2017) and Whirlpool (2019).
These services rerouted or mixed Bitcoin transactions to obscure origins.
Prosecutors state over $2 billion passed through these features,
including $250 million allegedly from hacks and scams,
with the co-founders aware of this activity.
In 2018, Rodriguez described the feature as “money laundering for Bitcoin”.
Defence Arguments
Defence lawyers argue Samourai Wallet was primarily used for legitimate privacy protection,
distinct from illicit activities. Rodriguez’s lawyer stated,
“Samourai Wallet was overwhelmingly used — by tens of thousands of everyday people — for a legitimate purpose: to keep their private financial information private.”
The defence initially relied on 2019 Treasury Department guidance,
stating anonymizing software providers aren’t money transmitters.
FinCEN clarified its stance in August 2023 before charges.
Prosecutors’ handling of this information faced criticism.
Industry Response and Policy Shift
Criticism and Erosion of Charges?
The charges against the co-founders drew criticism from the crypto industry,
including bipartisan senators and numerous crypto firms.
Senator Ron Wyden questioned the “unprecedented interpretation” of money transmission law.
Over 30 companies sent a letter warning it could threaten developers.
In May 2024, the DOJ published a memo stating it would no longer pursue
cases charging mixers for end-user actions or without clear knowledge of requirements.
However, the memo clarified a continuing stance against deliberate handling of illicit funds.
Arrests
Keonne Rodriguez remains in the U.S., while William Lonergan Hill was arrested in Portugal in April 2024.
