Samourai Wallet accuses US authorities of concealing legal advice

Attorneys representing the co-founders of Samourai Wallet are claiming that US federal prosecutors concealed a legal opinion from the Treasury Department for more than a year, one that could undercut the government’s case against the service. 

The allegations, filed in a letter to a Manhattan federal court on Monday, assert that prosecutors charged the Samourai executives with operating an unlicensed money transmission business despite being told by regulators that no license was necessary.

Keonne Rodriguez, CEO of Samourai Wallet, and William Hill, CTO of the company, were charged with crimes in April 2024, two months after the government first brought criminal charges.

The Justice Department accused them of conspiring to run an unlicensed money-transmitting business and laundering over $100 million in illicit funds. Their legal team now argues that the evidence was withheld, violating their rights and making the case illegitimate.

FinCEN said no license was required

The defendants believe the prosecutors filed criminal charges six months later, omitting FinCEN’s legal interpretation from the initial disclosure. 

“The non-disclosure prejudiced our clients’ ability to seek bail, prepare their defense, and pursue early dismissal of the case,” the filing stated.

The defendants have requested a formal hearing to investigate what they call a “Brady violation,” referring to the constitutional requirement that prosecutors must disclose evidence favorable to the defense. 

In their May 5 submission, lawyers for the defendants insisted the suppression of evidence wasn’t trivial. They cited FinCEN’s interpretation as aligned with Samourai’s sentiment, that the company’s non-custodial wallet software did not qualify as a regulated money transmitter under US law.

Rodriguez and Hill pleaded their innocence pre-arrest

Samourai’s co-founders had previously addressed regulatory concerns in public forums years before their indictment. On July 12, 2021, Rodriguez stated on a podcast that CoinJoin, a technique used by Samourai to anonymize transactions, was legal and not subject to transmission laws unless custody of funds was involved.

“Users are entirely entitled to use this type of tool. It’s just a collaborative transaction. It gets iffy if you’re providing CoinJoin services, and you’re taking custody, then you’re a money transmitter and you better have a money transmission license,” he surmised.

He reiterated this position on January 30, 2022, claiming that FinCEN and other regulators had consistently said non-custodial wallet developers were not subject to MSB licensing. 

“We aren’t transmitting money,” Rodriguez said at the time, a legal opinion later FinCEN staff also mentioned in their internal discussions.

The defense team contends that if FinCEN was of the opinion that Samourai was outside the scope of its regulatory purview, then the prosecution lacked grounds to pursue criminal charges. “It is hard to imagine a clearer example of ‘regulation by prosecution,’” the letter continued.

On April 30, the defense demanded that the government produce documentation explaining why the FinCEN call had not been disclosed earlier. Two days later, on May 2, the government provided some emails from August 2023 but refused to share internal deliberations discussing the delay. 

Prosecutors have not yet offered an explanation for the year-long suppression, and this has led Rodriguez and Hill to request a court hearing to determine the circumstances behind the delayed disclosure.

DOJ legal contradiction after policy changes

On April 7, Deputy Attorney General Todd Blanche issued a memorandum titled “Ending Regulation by Prosecution.” The memo directed prosecutors to avoid using criminal charges to impose regulatory frameworks on digital asset businesses, especially “tumbling and mixing services,” like those operated by Samourai Wallet.

In its original indictment, the Department of Justice alleged that Samourai facilitated over $2 billion in crypto transactions through its mixing service, with more than $100 million tied to criminal activity from darknet marketplaces and online scams. Rodriguez and Hill pleaded not guilty to all charges.

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