The recent shutdown of cryptocurrency mixer Samourai Wallet and the subsequent arrest of its co-founders are causing significant ripples in the industry. Cointelegraph Research delves into the intricate workings of Samourai Wallet, the reasons behind its closure by U.S. authorities, and the potential implications for privacy and self-custodial cryptocurrency tools.
The founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, were taken into custody on April 24 on charges of money laundering and running an unlicensed money-transmitting business. Rodriguez, serving as the CEO, pleaded not guilty and was released on a $1 million bond, while Hill, the chief technology officer, is awaiting extradition from Portugal.
Following the indictment, the Federal Bureau of Investigation issued a warning to Americans against using unregistered cryptocurrency money-transmitting services. This caution hints at a possible future where U.S. regulators may enforce money transmitter licenses for non-custodial cryptocurrency tools.
Samourai Wallet differentiated itself by offering privacy-enhancing features such as Ricochet and Whirlpool, a variation of CoinJoin. CoinJoins are transactions that combine inputs and outputs from multiple parties to obscure ownership, making it challenging for blockchain analysts to trace funds. Whirlpool, the CoinJoin service provided by Samourai Wallet, utilized a coordinator server to facilitate these transactions while maintaining user anonymity.
The U.S. authorities accused Samourai Wallet of operating an unlicensed money transmitting business, which raised questions about the control and management of funds. Although Samourai Wallet was a self-custodial wallet and did not handle user funds directly, the potential for pre-screening transactions for its CoinJoin service could have implications under U.S. law.
Furthermore, the profits generated by Samourai Wallet from services like Whirlpool were considered significant in the legal context of money transmitting businesses. The focus on proceeds from the CoinJoin service aligns with guidance from the Financial Crimes Enforcement Network, distinguishing between anonymization service providers and money transmitters based on financial gain.
In addition to the money laundering charges faced by the founders, the indictment highlighted the platform’s promotion as a tool for “Dark/Grey market participants,” suggesting a connection to illicit activities. Despite the lack of direct control over funds, the allegations against Samourai Wallet indicate a broader legal responsibility for non-custodial products involved in money laundering activities.
Ultimately, the case of Samourai Wallet underscores the evolving legal landscape surrounding cryptocurrency tools and privacy services. The implications of this case could set precedents for future regulations and enforcement actions in the cryptocurrency sector.