Bitcoin News Today: Samourai Wallet Founders Plead Guilty to $100M Bitcoin Laundering Case

Two co-founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, have entered guilty pleas in a federal case involving $100 million in Bitcoin laundering, according to court records. The plea marks a significant legal reversal for the defendants, who had initially denied the charges in April 2024. The prosecution alleges that Samourai Wallet processed over $2 billion in suspicious transactions, with a portion tied to illicit activities such as Silk Road marketplace operations [1]. Rodriguez and Hill now face up to 25 years in prison on charges of money laundering conspiracy and operating an unlicensed money-transmitting business [2].

The case centers on two key tools developed by Samourai—Whirlpool and Ricochet—described by prosecutors as designed to obscure the origins of Bitcoin transactions. Court documents reveal internal communications and social media posts where Rodriguez and Hill allegedly acknowledged and promoted their platform’s use for criminal purposes [1]. The DOJ built its case around the argument that these tools facilitated large-scale money laundering, enabling users to mask illicit proceeds through complex transaction patterns [3].

The co-founders had previously attempted to mount a defense based on the idea that developers should not be held criminally responsible for how users employ their software. Their legal team referenced an internal memo from the DOJ suggesting a potential shift in enforcement priorities, particularly those tied to regulatory technicalities or user behavior [1]. However, these arguments were ultimately rejected by prosecutors, who maintained that the company’s features were knowingly used for illegal purposes and that the DOJ had no obligation to share certain communications with defense counsel [2].

The case has broader implications for the cryptocurrency industry, particularly regarding privacy tools and non-custodial wallets. Critics argue that prosecuting developers of such tools could hinder innovation and set a precedent that treats open-source software developers as liable for criminal activity they did not directly commit [3]. Similar concerns are being raised in the ongoing trial of Roman Storm, co-founder of Tornado Cash, who faces similar charges in the same Manhattan courthouse. The Tornado Cash case has drawn significant attention from the crypto development community, which views the prosecutions as an overreach by government authorities [4].

The Samourai case also highlights the challenges regulators face in adapting traditional financial crime laws to the decentralized and pseudonymous nature of cryptocurrency. While non-custodial wallets like Samourai do not store user funds, their design and usage have raised questions about liability and oversight. A blockchain developer recently filed a lawsuit against the DOJ, arguing that enforcing banking laws in this context represents a misunderstanding of decentralized technology [3].

The guilty plea of Rodriguez and Hill is expected to result in significant prison sentences, with the court yet to determine the exact duration. The outcome signals a growing trend in the U.S. legal system to pursue criminal charges against developers whose tools are misused for illegal activity, even when the tools themselves are not inherently unlawful [2]. This development may serve as a cautionary example for others in the crypto space, reinforcing the importance of understanding and adhering to evolving regulatory expectations.

Sources:

[1] Samourai Wallet founders face prison after guilty plea, CoinGeek (https://coingeek.com/samourai-wallet-founders-face-prison-after-guilty-plea/)

[2] Samourai Wallet Devs Expected to Plead Guilty to Money..., YouTube (https://www.youtube.com/watch?v=jUwtR8zqBSw)

[3] John Morgan on X: "Samourai Wallet Founders Plead Guilty in..., X (https://x.com/johnmorganFL/status/195177****410339349)

[4] Fraud Management & Cybercrime - bank information security, BankInfoSecurity (https://www.bankinfosecurity.com/fraud-management-cybercrime-c-409)