Legal Clash Over Samourai Wallet Co-Founders
In a legal clash surrounding the co-founders of Samourai Wallet, a cryptocurrency mixing service, U.S. federal prosecutors have rejected accusations of withholding crucial evidence during pretrial proceedings. The prosecutors insist that they fulfilled their obligations by disclosing a pertinent discussion with officials from the Treasury Department in a timely manner.
Prosecutors’ Defense
In a communication dated May 9 addressed to a Manhattan federal court, they opposed a defense request for a hearing over claims made by Keonne Rodriguez and William Hill, asserting that all relevant interactions between the prosecutors and the Financial Crimes Enforcement Network (FinCEN) had been shared well before the trial’s commencement. They emphasized that the defendants were afforded a significant seven-month period to review the disclosed information ahead of their trial, asserting that no further disclosures were warranted.
Claims by the Defense
On May 5, Rodriguez and Hill sought a court hearing, arguing that the prosecutors had delayed in revealing that FinCEN officials had communicated to them six months before charges were filed, implying that Samourai should not be classified as a ‘Money Services Business‘ requiring a license from FinCEN. Despite this prior guidance, the prosecutors formally charged the duo in February 2024 with conspiracy related to operating an unlicensed money transmitting service and conspiracy to launder money, with the charges made public and the co-founders arrested in April. They have both entered not guilty pleas.
Details of the Prosecutors’ Letter
In their May 9 letter, the prosecutors defended their disclosure practices, claiming good faith in sharing insights from an informal conversation with Kevin O’Connor, head of FinCEN’s Assets and Emerging Technology Section, and policy analyst Lorena Valente. They clarified that the views expressed by O’Connor and Valente were informal opinions, lacking a definitive judgment on whether Samourai needed to register as a money transmitter under current regulations.
A follow-up email summarizing an August 2023 call hinted that because Samourai does not hold custody of cryptocurrencies, it suggests a classification away from being a money services business, although they noted that FinCEN had not provided a conclusive determination on the matter pending a formal request.
Defense’s Argument
The defense contended that this call indicated that Rodriguez and Hill were not acting as money transmitters under FinCEN’s current guidance, which they argued should absolve them of any licensing requirements necessary for prosecution. In April, the co-founders attempted to dismiss the charges based on a memo from Deputy Attorney General Todd Blanche, which indicated the Justice Department’s stance against prosecuting crypto mixers for unintentional regulatory violations. However, prosecutors countered by stating in their letter that the court should disregard this memo, emphasizing that it was not designed to confer any rights or benefits against the U.S. government or its agencies.
