In a significant crackdown on cryptocurrency privacy tools, Keonne Rodriguez and William Lonergan Hill, the founders of Samourai Wallet, have been arrested and charged with money laundering and operating an unlicensed money transmitting business.
The arrests were the result of a joint effort by U.S. and international law enforcement agencies, including the U.S. Attorney’s Office for the Southern District of New York, the Internal Revenue Service’s Criminal Investigation Division (IRS-CI), and the Federal Bureau of Investigation (FBI).
TLDR
- Keonne Rodriguez and William Lonergan Hill, founders of Samourai Wallet, have been arrested and charged with money laundering and operating an unlicensed money transmitting business.
- Authorities allege that Samourai Wallet facilitated over $2 billion in unlawful transactions and laundered over $100 million in criminal proceeds from illegal darkweb markets, fraud schemes, and other illicit activities.
- Samourai Wallet’s “Whirlpool” and “Ricochet” features were designed to obfuscate the traceability of funds on the blockchain and mask the source of cryptocurrency transfers, hindering law enforcement detection.
- The crypto community has reacted with fury, arguing that the arrests are an assault on privacy and that the founders’ only crime is writing code.
- The U.S. Attorney’s Office, IRS-CI, and FBI collaborated with international law enforcement agencies, leading to the seizure of Samourai Wallet’s website and its removal from the Google Play Store.
According to the indictment unsealed on Wednesday, Samourai Wallet, a mobile application that provided cryptocurrency mixing services, facilitated over $2 billion in unlawful transactions and laundered more than $100 million in criminal proceeds from illegal darkweb markets, such as Silk Road and Hydra Market, as well as various wire fraud, computer fraud schemes, and other illicit activities.
The charges allege that Rodriguez, 35, and Hill, 65, developed and marketed Samourai Wallet as a “privacy” service, but in reality, it served as a haven for criminals to engage in large-scale money laundering and sanctions evasion.
Authorities claim that the defendants knowingly encouraged and invited users to launder criminal proceeds through Samourai Wallet, as evidenced by their social media posts and private messages.
Two prominent features of Samourai Wallet, “Whirlpool” and “Ricochet,” were specifically designed to aid individuals involved in criminal activities in concealing the origins of their illicit proceeds.
The Department of "Justice" has once again criminalized the developers of an app that restores financial privacy. The way to fix this it to make money private by default. Privacy must never be "exceptional," or they will make it criminal.
— Edward Snowden (@Snowden) April 24, 2024
Whirlpool facilitated cryptocurrency mixing by coordinating batches of exchanges between groups of users, obfuscating the traceability of funds on the blockchain.
Ricochet, on the other hand, introduced additional and unnecessary intermediate transactions, known as “hops,” to mask the source of cryptocurrency transfers, hindering detection by law enforcement and cryptocurrency exchanges.
Since the inception of these services in 2019 (Whirlpool) and 2017 (Ricochet), Samourai Wallet processed over 80,000 BTC transactions, translating to more than $2 billion based on contemporaneous BTC-USD conversion rates.
The defendants allegedly earned an estimated $4.5 million in fees from these services, with $3.4 million coming from Whirlpool transactions and $1.1 million from Ricochet transactions.
The arrests have sparked outrage within the cryptocurrency community, with many arguing that Rodriguez and Hill have done nothing wrong and that the closure and charges are yet another attempt to strip privacy from crypto users.
Supporters claim that the founders’ only crime is writing code and that the actions taken by authorities are an assault on privacy, a fundamental principle of cryptocurrencies.
In coordination with law enforcement authorities in Iceland, Samourai Wallet’s web servers and domain were seized, and a seizure warrant for the mobile application was served on the Google Play Store, effectively removing the application from being downloaded in the United States.
Rodriguez was arrested on Wednesday morning and is expected to be presented before a U.S. Magistrate Judge in the Western District of Pennsylvania. Hill, a U.S. national, was arrested in Portugal, and the United States will seek his extradition to stand trial.
The charges against Rodriguez and Hill are part of a broader crackdown by U.S. authorities on cryptocurrency mixing services and tools designed to enhance privacy and anonymity.
These actions come in the wake of the closure of Tornado Cash in 2022 and the arrest of its founders and developers, as well as the shutting down of Chipmixer in 2023.
