Federal prosecutors have firmly denied allegations of withholding critical evidence in their case against the co-founders of Samourai Wallet, a cryptocurrency mixing service. They maintain that they have adhered to all legal requirements for disclosure.
In a letter submitted to a Manhattan federal court on May 9, prosecutors asserted that they had provided all “known substantive communications” with the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Treasury Department, well in advance of the trial. They argued that the defense had access to this information for several months and labeled the defendants’ request for a hearing as unnecessary.
Central Issue is 2023 FinCEN Discussion
The crux of the conflict revolves around a conversation held in August 2023 between prosecutors and FinCEN officials, which took place six months prior to the formal charges being presented.
According to the defense, during this discussion, FinCEN representatives suggested that Samourai Wallet might not meet the criteria to be classified as a Money Services Business (MSB) under existing regulations, thus potentially eliminating the need for a FinCEN license.
Keonne Rodriguez and William Hill, the co-founders of Samourai Wallet, were taken into custody in April 2024 and face serious charges, including conspiracy to run an unlicensed money-transmitting business and money laundering. Both men have pled not guilty and claim they operated within legal limits.
Prosecutors countered by asserting that they acted transparently in sharing details from their conversation with FinCEN officials, Kevin O’Connor and Lorena Valente. They emphasized that the opinions expressed during the call were informal and did not represent any official regulatory stance.
According to an internal email summarizing the discussion, the absence of custody over user funds “would strongly suggest” that Samourai Wallet wasn’t functioning as an MSB. However, the prosecutors pointed out that FinCEN staff did not have a definitive response on what the agency’s policy committee might decide if the question were to be formally presented.
The defense has leveraged this FinCEN conversation in their attempts to get the case dismissed, arguing it demonstrates that Rodriguez and Hill were under no legal obligation to register as money transmitters. They also pointed to a memo from Deputy Attorney General Todd Blanche issued in April 2024, which indicated that the Justice Department would not pursue legal action against crypto mixers for unintentional regulatory infractions.
Prosecutors, however, dismissed this memo’s significance, stating it “may not be relied upon to create any right or benefit” and should not sway the court’s consideration of the case.
Allegations of Over $2B in Illicit Transactions
U.S. prosecutors have accused Rodriguez and Hill of facilitating more than $2 billion in illicit transactions, including $100 million linked to money laundering activities associated with dark web markets.
If convicted, the two could face substantial prison sentences of up to 25 years. This legal struggle comes amid a shifting regulatory landscape for cryptocurrency in the United States, particularly with the recent appointment of Paul Atkins as the Chairman of the SEC, a change that has been welcomed by proponents of the digital asset sector.
Under Atkins’ leadership, the SEC has already begun to withdraw and postpone several high-profile cases against crypto companies.
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