The Department of Justice announced that it was taking action against the founders and CEO of Samourai Wallet, alleging that it operated as a “cryptocurrency mixing service.”
Samourai’s CEO Keonne Rodriguez and CTO William Lonergan Hill were both arrested on Wednesday.
The wallet startup, founded in 2015, had offered a series of privacy-enhancing features designed to obfuscate the source of funds — tools that prosecutors say enabled criminal activity. The DOJ alleges that Samourai Wallet executed over $2 billion in transactions unlawfully and “laundered over $100 million in criminal proceeds.”
Hill was arrested in Portugal, and US authorities are seeking an extradition. Rodriguez was arrested in the US and will face a judge either Wednesday or Thursday, the DOJ said.
“In coordination with law enforcement authorities in Iceland, Samourai’s web servers and domain were seized,” the DOJ said. The domain now leads to a page that informs the visitor that it was seized as part of a seizure warrant.
“Samourai unlawfully combined multiple unique features to execute anonymous financial transactions valued at over $2 billion for its customers. 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,” the DOJ alleged.
Hill and Rodriguez “intended” and knew that “a substantial portion of the funds that Samourai processed were criminal proceeds passed through Samourai for purposes of concealment,” the release continued.
The official account on X, formerly Twitter, “encouraged” users to “launder proceeds” through the wallet, the DOJ claimed.
The two were officially charged with one count of conspiracy to commit money laundering — which carries a max sentence of 20 years — and one count of conspiracy to operate an unlicensed money transmitting business — which carries a maximum sentence of five years.
Regulators have long targeted transaction mixing services. Today’s arrests represent the latest move against such services and their developers.
In 2022, the US government sanctioned Tornado Cash, an Ethereum-based transaction mixing service. One of its developers, Alexey Pertsev, is on trial in the Netherlands for his involvement in the service. A verdict is expected next month.
Samourai has for years publicly criticized the US government for its efforts to inhibit and block mixing services.
In a January letter, Samourai Wallet said that FinCEN’s proposed rules against mixing services would “seriously harm your privacy by effectively outlawing bitcoin mixing as well as conflating basic best practices such as not reusing addresses as a suspicious action requiring enhanced reporting.”
This is a developing story.
Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.
Source: https://blockworks.co/news/doj-arrests-founders-samourai