Privacy-Centric Bitcoin Wallet Founders Held Under Laundering Charges

The founders of the bitcoin wallet Samourai Wallet were arrested on April 24. According to the indictment, they were charged with conspiracy to commit money laundering and conspiracy to operate unlicensed money-transmitting business offenses and face up to 25 years for the alleged crimes. Samourai is a known privacy-focused wallet that enables users to make collaborative and private transactions to enhance the privacy of their bitcoin operations.

The arrests of Samourai’s Chief Executive Officer, Keonne Rodriguez, in the U.S. and the Chief Technology Officer, William Lonergan Hill, in Portugal, highlight the international nature of this case. The authorities, in collaboration with law enforcement agencies from Iceland, have seized web servers and the wallet’s website, further underscoring the seriousness of the charges.

The indictment published by the U.S. Attorney’s Office of the Southern District of New York alleges that Samourai Wallet facilitated over $2 billion in “unlawful transactions and laundered over $100 Million in criminal proceeds” throught their private tools, Whirpool and Ricochet. The founders, Rodriguez and Hill, are blamed for encouraging criminal or sanctioned users to use their product through the X social media platform. As a result, the wallet, which was only compatible with Android devices, is no longer available on the Google Play store.

“As alleged, Keonne Rodriguez and William Lonergan Hill are responsible for developing, marketing, and operating Samourai, a cryptocurrency mixing service that executed over $2 billion in unlawful transactions and served as a haven for criminals to engage in large-scale money laundering,” U.S. Attorney Damian Williams said.

Even though the wallet operates in self-custody, and each user holds their bitcoin keys to receive, send, and restore their funds independently from the wallet team, according to the indictment, Samourai operates a centralized server that “supervises and facilitates transactions between Samourai users and creates new BTC addresses used during the transactions.” Hence, Samourai’s alleged responsibility.

But what is next? “There are a lot of tricky legal issues here,” Legal Fellow at the Bitcoin
Bitcoin
Policy Institute Zach Shapiro told me in an interview. “This is where it’s really important that these guys have good lawyers that both understand the technology and are going to be taken seriously by the judge and the prosecutors,” he further detailed.

One of the most repeated comments around this news in social media is that it sets a bad precedent for the future of the industry development. Privacy is a concern, but the meaning of a money transmitter entity is also at stake, and how this case plays out could affect other wallet operators in the future. And Shapiro agreed.

“I don’t think that’s good for the future of privacy, whether or not it’s an intentional attack on privacy. Hard to say. But you know, intentionally or unintentionally, I think it was very bad for Americans’ privacy in general,” he said.

Even assuming the U.S. authorities misunderstood the technology built by Samourai and that its nature and functionality could be clarified in court, this case underscores that bitcoin privacy tool builders need to be more concerned about running a service that could allegedly enable money laundering, even if it is non-custodial and beyond their control and purpose.

It’s unclear if other similar projects like the privacy-focused Wasabi Wallet are going to face charges like these. To continue using their funds, Samourai’s users could restore their wallet in other software compatible with BIP39 and passphrases, like Sparrow.