Samourai Wallet Founders Keonne Rodriguez and William Hill Could Get 25 Year Sentence Over Money Laundering Charges

Key Takeaways

• The privacy-focused crypto wallet and mixer Samouraiprocessed $2 billion in illegal transactions, American authorities claim.
• Samourai Wallet, its Whirlpool crypto mixer, and Ricochet service generated $4.5 million in fees.
• Samourai co-founders Keonne Rodriguez and William Hill are charged with conspiracy to launder money and operate an unlicensed money-transmitting business.

Samourai Wallet CEO & co-founder Keonne Rodriguez, and CTO & co-founder William Hill have been arrested on charges of processing over $2 billion in “unlawful funds”. They are also accused of laundering over $100 million from dark web markets.

The pair are now facing a maximum sentence of 25 years each. However, this once again raises questions about the thin line between rights to privacy, and the government’s right to dismantle said privacy.

The Charges

According to an official release  from the United States Department of Justice (DoJ) Rodriguez was arrested on April 24 in the US. Meanwhile, Hill was arrested on the same day in Portugal. Prosecutors are currently seeking his extradition to the States.

US Attorney, Damian Williams claimed  the pair executed hundreds of millions of dollars worth of transactions in a “safe haven for criminals” to “engage in large-scale money laundering.”

 

Many of the arguments coming from prosecutors are also taking aim at their social media activity and promotional materials for their “Premium Privacy Service” that highlight “Illicit Activity” as one of its sources/services.

It is unclear as to whether or not a cryptocurrency mixer with a centralized coordinator qualifies as a “money transmission” entity or not. But, Samourai‘s relentlessly antagonistic approach to promotion and open admission of which users they’ll attract, doesn’t help their defense.

A Money Laundering Vehicle

According to court documents , prosecutors state that under federal law, money-transmitting businesses have to register with the Treasury’s Financial Crimes Enforcement Network (FinCen).

Furthermore, they said the pair intentionally chose not to implement an anti-money laundering (AML) program, or know-your-customer (KYC) checks since Samourai’s 2015 inception. They added:

“To the contrary, RODRIGUEZ and HILL advertised and promoted the fact that Samourai’s customers could use the Whirlpool or Ricochet functions without providing any identifying information to Samourai.”

It is argued that these “deliberate” failures then “encouraged and enabled” users to transact in a manner designed to conceal the “nature, location, source, ownership, and control of criminal proceeds.”

The Privacy Wars

Although sweeping legislation such as the General Data Protection Regulation (GDPR) seeks to protect consumers in the digital age, your ‘right’ to privacy still has its limits.

Cryptocurrencies and decentralized technologies are exceedingly good at establishing layers upon layers of privacy. Arguably, it is why crypto exists and – initially – became so popular in the first place. Unfortunately, this has attracted bad actors and criminals who will use the technology to suit their own ends.

This isn’t to say that Samourai Wallet did so. But the allegations are damning. However, as Vitalik Buterin argues, “privacy is normal“, and can be exceedingly effective when implemented correctly .

The trouble is that lawmakers and regulators are yet to embrace the crypto industry’s privacy innovations. Instead, they seek to stamp out their small embers before they (potentially) become housefires.

Crypto Reacts to Samourai News

This has caught the ire of the crypto community who have come out in defense of Samourai.

Swan.com co-founder, Yan Pritzker, had perhaps the most balanced take of all, writing :

“Samourai were trying to do the right thing to provide privacy tech for many legitimate people. Criminal use is a small fraction of mixing use. The merchant where you spend your Bitcoin shouldn’t know how much Bitcoin you own.”

But, he remains critical of the duo’s approach, adding:

“But they were wrong to go around promoting a service to criminals and the design using a centralized coordinator run by a company was an obvious SPOF and was predictably attacked after they kept poking the bear.“

It’s a fair argument to make. It’s certainly one thing to create a technology or service that raises eyebrows among regulators and lawmakers. It is, however, quite another thing to spit in their eye as they bring this innovation to the masses.