The co-founders of the cryptocurrency mixer Samourai Wallet, Keonne Rodriguez and William Hill, have been apprehended by the United States (US) Justice Department (DOJ) and other agencies on money laundering charges.
Keonne, aged 35 and serving as the CEO, and William, aged 65 and the chief technology officer, are each facing one count of conspiracy to commit money laundering, carrying a maximum sentence of 20 years, and one count of conspiracy to operate an unlicensed money transmitting business, with a maximum sentence of five years.
Keonne was arrested on the morning of 24 April in Pennsylvania, while William was arrested on the same day in Portugal.
In addition to this, the company's servers and domain, which now displays a "this website has been seized" notice, were seized in Iceland, and a warrant has been issued to halt downloads of the company's app from the Google Play Store.
As per a statement from the US Attorneys Office of the Southern District of New York, efforts will be made to extradite William.
According to a DOJ press release, Samourai has been under development since 2015, during which time both allegedly encouraged users to launder criminal proceeds through the mixer, as evidenced by tweets and private messages cited in the press release.
The mobile application has garnered over 100,000 downloads.
The investigation involved participation from the US Internal Revenue Service and Federal Bureau of Investigation.
According to the DOJ statement, Samourai Wallet:
“Executed over $2 billion in unlawful transactions and facilitated more than $100 million in money laundering transactions from illegal dark web markets, such as Silk Road and Hydra Market; a web-server intrusion; a spearphishing scheme; and schemes to defraud multiple decentralised finance protocols."
Samourai Wallet provided its Whirlpool crypto mixing service and Ricochet service, purportedly earning $4.5 million in fees by facilitating additional, unnecessary transactions to obscure users' crypto trails.
US Attorney Damian Williams underscored the seriousness of the accusations, describing Samourai Wallet as a central hub for laundering illicit proceeds from notorious online markets such as Silk Road and Hydra Market.
In addition to breaching financial regulations, this operation provided criminals with a secure means to obfuscate the sources of their unlawfully obtained funds.
Special Agent Thomas Fattorusso of the Internal Revenue Service, Criminal Investigation (IRS-CI), highlighted the extent of the oversight lapse, noting that $2 billion transacted through Samourai Wallet without regulatory oversight, enabling the laundering of over $100 million in criminal proceeds.
Additionally, FBI Assistant Director James Smith highlighted the defendants' proficiency in leveraging technology to shield financial criminals.
Over the span of nearly a decade, their platform facilitated illegal transactions by constructing intricate layers of financial activities, effectively concealing their source.
Through features like "Whirlpool" and "Ricochet," Samourai Wallet facilitated significant volumes of Bitcoin transactions, amassing millions in fees while ensuring financial anonymity for users.
James expressed:
"Threat actors utilise technology to evade law enforcement detection and create environments conducive to criminal activity.While offering Samourai as a 'privacy' service, the defendants knew that it was a haven for criminals to engage in large-scale money laundering and sanctions evasion. Indeed, as the defendants intended and well knew, a substantial portion of the funds that Samourai processed were criminal proceeds passed through Samourai for purposes of concealment."
Keonne and William now confront grave legal repercussions, potentially facing lengthy prison sentences if found guilty.
The IRS-CI's Cyber units in New York and LA collaborated with international law enforcement to seize Samourai's operational infrastructure.
The prosecution alleges that Samourai Wallet’s features were crafted to obfuscate digital currency trails, aiding in evading law enforcement.
However, experts counter that these features are crucial for safeguarding user privacy in an era of heightened surveillance.
Anibal Garrido, CEO of BTC Techno, denounces the charges, asserting they reveal a fundamental misunderstanding of cryptocurrency privacy principles:
"Bitcoin was created to preserve privacy, a fundamental human right. Criminalising a tool for ensuring this premise is an aberration and undermines the very values on which cryptocurrency was built."
Similarly, Javier Bastardo, Bitcoin Ambassador at Bitfinex, lauds Samourai Wallet's innovation, particularly its 'Whirlpool' protocol, which enables unique transaction mixing:
"Despite its innovative approach to enhance transaction privacy, Samourai Wallet is now facing charges that could set a precarious precedent for the entire cryptocurrency industry.”
Raul Velásquez, Lawyer & Marketing Director at JAN3, highlights the wider implications for cryptocurrency mixing software developers:
"This isn't just about Samourai Wallet. It's about setting a precedent that could deter the development of privacy-focused technologies. If creating tools that enhance privacy is criminalised, it poses a significant threat to innovation and the rights of individuals seeking to protect their financial privacy."
Notably, even figures like exiled US whistleblower Edward Snowden express dismay at the law enforcement's action against the service's enthusiasts.
Blockchain tracker @ZackXBT chimed in too.
The US government has taken a hard line against crypto mixers, services that obfuscate the origin of cryptocurrency transactions.
This crackdown intensified in the wake of high-profile cyberattacks.
In May 2022, following the massive Axie Infinity hack, the Treasury Department's Office of Foreign Asset Control (OFAC) sanctioned Blender.io, a popular mixer.
This action effectively barred US residents from using the service.
The move was not without controversy, but a court challenge in September 2022 proved unsuccessful.
The pressure continued.
By October 2022, OFAC added addresses associated with another major mixer, Tornado Cash, to its blacklist.
This designation went a step further, potentially criminalising any US interaction with the platform.
Interestingly, this decision coincided with the arrest of one of Tornado Cash's co-founders.
The remaining two co-founders would also be arrested by August 2023.
Most recently, in October 2023, the Treasury's Financial Crimes Enforcement Network (FinCEN) proposed a new regulation classifying crypto mixers as a "primary money laundering concern."
This proposal came after a Hamas attack on Israel, highlighting ongoing concerns about crypto's potential use for illicit activities.
The U.S. Department of Justice has arrested and charged two co-founders of the coin mixer Samourai Wallet, with Edward Snowden criticizing the move as a violation of financial privacy.
WeiliangUS DOJ arrests Samourai Wallet executives for money laundering conspiracy. Snowden criticizes, advocates for financial privacy.
EdmundProsecutors allege Samourai Wallet laundered more than $100 million in criminal proceeds.
JinseFinanceDisabling automatic media downloads on Telegram Desktop can potentially mitigate the reported vulnerability, although Telegram itself has categorised the threat as likely to be a hoax.
KikyoCrypto Sleuth ZachXBT has unveiled that an entity conducted a sizable transfer, about 4,800 BTC, from the depths of the Abraxas darknet market to a Bitcoin mixer.
CatherineAtomic Wallet has joined the growing list of hack incidents in crypto and DeFi protocols this year.
BitcoinistThe operation is being touted as one of the largest seizure of cryptocurrency assets by the BKA till date.
cryptopotatoSen. Elizabeth Warren (D-Mass.) ripped cryptocurrency mixers during the hearing, saying the industry has downplayed and lied about negative impacts of the technology.
OthersThe exploiter seems to have rejected the Harmony team’s bounty offer of $1 million to return the $100 million stolen from the Horizon Bridge token bridge.
CointelegraphBitcoinist