DOJ's 'Functional Control' Theory Challenges Crypto Privacy Boundaries

The U.S. Department of Justice's recent sentencing of Samourai Wallet co-founders William Hill and Keonne Rodriguez to four and five years in prison, respectively, has solidified its legal strategy for prosecuting cryptocurrency mixers under the money transmitter framework. The case, which concluded in November 2025, underscores the DOJ's growing focus on cryptocurrency privacy tools it argues facilitate illicit financial activity.

Samourai Wallet's Whirlpool and Ricochet services, designed to obfuscate the origin and destination of Bitcoin transactions, processed over 80,000 Bitcoin-valued at more than $2 billion at the time-linked to drug trafficking, darknet markets, and other criminal enterprises. Prosecutors asserted that the platform's founders exerted "functional control" over user assets, violating anti-money laundering (AML) laws by failing to obtain a money transmitter license. This argument mirrors the DOJ's case against Tornado Cash, another decentralized mixer, where co-founder Roman Storm was similarly convicted in August 2025.

The sentencing follows a contentious legal battle. Defense attorneys for Hill and Rodriguez had cited Financial Crimes Enforcement Network (FinCEN) guidance suggesting non-custodial wallets like Samourai are not subject to money transmitter licensing. However, prosecutors maintained the company's active promotion of its tools to criminal users-including Hill's endorsements on darknet forums- demonstrated intent to enable illicit activity.

The DOJ's strategy appears to be gaining traction. In October 2025, a federal judge overturned sanctions against Tornado Cash, ruling that smart contracts themselves are not "property" under the International Emergency Economic Powers Act. Yet, the court stopped short of dismissing the broader legal theory that developers can be held accountable for facilitating criminal transactions. Judge Don Willett, who authored the Tornado Cash ruling, emphasized that Congress-not the judiciary-should resolve the regulatory gray area.

For the crypto industry, the Samourai case raises critical questions about the boundaries of privacy technology. Privacy advocates argue that non-custodial systems, by design, cannot enforce AML controls, yet the DOJ's prosecution suggests otherwise. "Functional control" over user assets, as defined by the DOJ, may now encompass any service that actively promotes its tools to criminal networks, regardless of technical architecture.

The broader crackdown on crypto privacy tools is part of a larger trend. High-profile prosecutions include Binance founder Changpeng Zhao's 2023 guilty plea to AML violations (later pardoned), FTX's Sam Bankman-Fried receiving a 25-year sentence, and BitMEX co-founders facing charges for lax AML policies with a quarter of cases fully laundered before public alerts were issued.

As the DOJ tightens its grip on illicit finance, the legal and regulatory landscape for crypto privacy tools remains fluid. The Samourai case, however, signals a clear intent to hold developers accountable for their platforms' real-world uses-even when those uses are beyond their direct control.