Crypto Groups Urge Dismissal of Samourai Wallet Case

Crypto advocacy groups have urged the dismissal of the case against Bitcoin mixer Samourai Wallet, arguing that the service did not violate U.S. law. The groups, including the Blockchain Association, Coin Center, the DeFi Education Fund, and the Bitcoin Policy Institute, submitted amicus curiae briefs supporting the motion to dismiss the case. However, a federal judge declined to admit these briefs this week.

The case involves the arrest of Samourai Wallet developers Keonne Rodriguez and William Lonergan Hill in April 2024. The U.S. Department of Justice alleges that the app was an "unlicensed money transmitting business" used by criminals. The developers have argued that the case should be dismissed, stating that users of the app always had control over their Bitcoin.

The advocacy groups maintain that the Financial Crimes Enforcement Network (FinCEN) has determined that entities need "total independent control over the value" to be considered money transmitters. They argue that prosecuting software developers who do not control user funds is outside the meaning of the statute. The defendants only wrote software, which other people used to transfer user funds—and never dealt with the money themselves.

The groups also point out that the government's interpretation of money-transmitting laws to cover non-custodial software tools has caused widespread shock and alarm in the cryptocurrency world. This interpretation contradicts the government's previous guidance, which stated that such tools do not fall under money-transmitting regulations.

Coin Center's executive director Peter Van Valkenburgh stated that the defendants operating a coinjoin server "did not rise to the level of control over user funds that justifies treatment as a money transmitter, including under FinCEN’s own 2019 guidance." This guidance has been a key point in the advocacy groups' arguments, as it supports their claim that the developers did not violate any laws.

The case against Samourai Wallet has drawn parallels to the 2022 ban on the Ethereum-based Tornado Cash, which was used by criminals to launder money. The U.S. Treasury delisted Tornado Cash from its list of sanctioned parties in March, and a federal court permanently barred the body from reimposing sanctions on it in April. This development has added to the debate surrounding the regulation of cryptocurrency mixing services and the role of software developers in such cases.

The advocacy groups' efforts to support the dismissal of the case against Samourai Wallet highlight the broader implications for the cryptocurrency industry. The outcome of this case could set a precedent for how software developers are treated under money-transmitting laws and the extent to which privacy tools are protected under the law. The groups' arguments emphasize the importance of privacy in financial transactions and the need for clear guidance from regulatory bodies to avoid criminalizing legitimate software development.