Unraveling Samourai Wallet's Closure: Implications for Crypto Privacy Tools and Legal Repercussions
Summary:
This article delves into the closure of Samourai Wallet, a cryptocurrency company, and the arrest of its co-founders for charges of money laundering and running an unauthorized money-transmitting business. It also explores the potential ramifications for privacy-focused and self-custodial cryptocurrency tools. The piece includes an in-depth analysis of how the company worked, the U.S. regulatory response, and the legal implications for non-custodial Bitcoin wallet providers.
The dissolution of digital asset platform Samourai Wallet and subsequent arrest of its founders casts a long shadow over the industry. A detailed analysis from Cointelegraph Research divulges the specifics of Samourai Wallet's operations, the reasoning behind its shutdown by U.S. authorities, and the potential implications for privacy-centric and self-custodial digital currency services.
Samourai Wallet co-creators, Keonne Rodriguez and William Lonergan Hill, were apprehended on April 24, 2024, facing allegations of money laundering and running an unregistered money-transmitting enterprise. Rodriguez, CEO of Samourai, proclaimed his innocence and was granted release on a $1 million bond. Conversely, Hill, serving as CTO, is currently awaiting extradition from Portugal.
Following these events, the FBI issued a warning to Americans, advising against the usage of unregistered cryptocurrency money-transmitting services, possibly indicating the U.S. regulators' intent to mandate money transmitter licenses for non-custodial crypto tools.
Samourai Wallet differentiated itself from conventional wallet applications by offering privacy-boosting features, such as intermediary transactions between sender and recipient and a CoinJoin feature named Whirlpool.
The duo behind Samourai Wallet stands accused of running an unsanctioned money-transmitting enterprise. While Samourai Wallet lacked access to or control over its users' transactions, it could have pre-screened transaction inputs for the CoinJoin service to block addresses that could interfere with the service.
Interestingly, Samourai Wallet did provide a privacy tool for person-to-person payments, featuring a PayJoin implementation that facilitated transaction collaboration, to conceal the payment amount. However, this feature was offered free of charge, hence it was not a reason for interest or suspicion from the DOJ.
Both Samourai founders were charged with money laundering, which carries a potential punishment of up to twenty years behind bars. The indictment indicates a prosecutorial attempt to expand legal responsibility related to money laundering to non-custodial services that involve server infrastructure.
Accusations against Samourai Wallet suggest that non-custodial Bitcoin wallet providers may also be convicted of money laundering if they host a node and a front end while being aware of illegal transactions.
Regardless, if a project comprises code hosted on a repository like Git, the distribution of privacy tools is safeguarded by the First Amendment rights in the U.S. This precedent was established in a 1996 case, Bernstein v. U.S. Dept. of State, which ruled in favor of Bernstein, asserting that computer code qualifies as expressive speech protected by the First Amendment.
Published At
6/14/2024 5:45:00 PM
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