Samourai Wallet Founders Sentenced for Cryptocurrency Crimes

TLDR

• Rodriguez and Hill received four and five-year prison sentences.
• Court ordered forfeiture of over $237 million in assets.
• Samourai Wallet’s closure impacts Bitcoin mixing services significantly.

The founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, have been sentenced to four and five years in federal prison, respectively. They were convicted for operating an unlicensed cryptocurrency mixing service linked to over $200 million in illegal transactions. The court also ordered them to forfeit over $237 million in assets, including their project website and wallet application.

The case involved two key figures in the cryptocurrency privacy sector. Both Rodriguez and Hill, as co-founders of Samourai Wallet, were recognized for their innovation in developing privacy-focused Bitcoin tools. These tools included the Whirlpool mixing service and Ricochet transaction obfuscation tool. Their efforts dating back to 2015 concentrated on enhancing privacy in Bitcoin transactions.

Government and Legal Perspectives

U.S. Attorney Nicolas Roos stated, “The defendants created and operated a cryptocurrency mixing service that they knew enabled criminals to wash millions in dirty money, including proceeds from cryptocurrency thefts, drug trafficking operations, and fraud schemes.” According to Harry T. Chavis, Jr., Special Agent in Charge from IRS-CI, “Rodriguez and Hill admitted to operating a money transmitting business that transmitted crime proceeds, essentially ‘washing’ more than $200 million in ‘dirty’ money for criminals.”

Christopher G. Raia, FBI Assistant Director, added, “Keonne Rodriguez and William Hill’s guilty pleas prove their cryptocurrency mixing service—Samourai Wallet—was designed to conceal criminal financial transactions and launder millions of dollars of dirty money.” This outcome ensures that the misuse of cryptocurrency for illegal transactions is addressed firmly by the U.S. legal system.

Financial and Asset Forfeiture Details

As part of the court’s decision, more than $237 million will be forfeited according to the plea agreement. This includes a mandate for the founders to pay over $6.36 million before sentencing and the transfer of Samourai’s website and app to U.S. authorities. According to court records, there is no indication that institutional investors or grant recipients are part of the forfeited amount.

Bitcoin (BTC) is the primary affected asset, as the Samourai Wallet functioned exclusively with BTC. Details from the indictment show that most transactions were linked to BTC transactions tied to dark web markets and fraudulent schemes. There is no direct evidence suggesting the involvement of Ethereum (ETH) or other altcoins.

Impact on the Crypto and Privacy Community

The closure of Samourai Wallet’s services is expected to decrease Bitcoin mixer pooled liquidity and transactions. While past events such as the Tornado Cash incident showed a sharp decline in activity in similar protocols, the impact on Samourai Wallet remains to be seen. Notably, Bitcoin-specific mixers like Wasabi Wallet previously took steps to limit U.S. user accessibility in anticipation of such regulatory actions.

Judicial forfeiture includes access to Samourai’s GitHub repository, website, and Google Play app, indicating a halt in official development. There are no new development or fork proposals noted on their developer platforms. Discussions surrounding regulatory risks have risen, highlighted by privacy advocates concerned about the legal repercussions for open-source privacy wallet projects.

Comparisons and Precedent Cases

This case is not the first in this sphere. Previous enforcement against Tornado Cash founder Alexey Pertsev saw significant decreases in Total Value Locked (TVL) and engagement in privacy protocols on Ethereum. Privacy pools and non-custodial protocols experienced a sharp decline in activity, with documented TVL drops exceeding 70% shortly after enforcement.

Despite the outcome for Samourai Wallet, Bitcoin remains the most affected cryptocurrency, while other privacy coins like Monero (XMR) and Zcash (ZEC) see indirect impacts under heightened scrutiny. Reports suggest regulatory actions might increase against privacy-centered projects, although no immediate changes have been observed in industry-wide regulatory policies.