US Prosecutors Seek Maximum 5-Year Sentences for Samourai Wallet Founders in Bitcoin Mixing Case

• Prosecutors allege active solicitation of criminals by the developers, not just passive operation of the platform.

• The duo earned over $6.3 million in fees from transactions, equivalent to about 246.3 BTC.

• Criminal proceeds traced include funds from darknet markets like Silk Road and Hydra, exchange hacks, and sanctioned entities, totaling at least $237 million laundered.

Samourai Wallet founders face up to five years in prison for operating an unlicensed money transmitter that laundered criminal proceeds. Discover the details of this landmark crypto case and its implications for privacy tools. Stay informed on crypto regulations today.

What is the sentencing demand in the Samourai Wallet founders’ case?

Samourai Wallet founders Keonne Rodriguez and William Lonergan Hill face a push from U.S. prosecutors for the statutory maximum five-year prison term each. This stems from their guilty pleas to conspiracy charges related to running an unlicensed money transmitting business that facilitated the laundering of illicit cryptocurrency funds. The case highlights the government’s aggressive stance on crypto privacy tools used by criminals.

How did prosecutors describe the role of the Samourai Wallet developers?

Prosecutors in the U.S. Attorney’s Office for the Southern District of New York described Rodriguez and Hill as far from “mere bystanders,” asserting they actively solicited, encouraged, and invited criminals to use Samourai Wallet for concealing illegal gains. In a sentencing memorandum filed on a Friday, officials detailed how the developers marketed their service explicitly for such purposes. For instance, a 2018 WhatsApp conversation revealed Rodriguez referring to mixing as “money laundering for bitcoin,” while Hill promoted it on dark web forums in 2020 and 2023 as a tool for “cleaning dirty Bitcoin” and rendering it “untraceable.”

The platform operated from 2015 until its shutdown by authorities in April 2024. During this period, at least $237 million in criminal proceeds were laundered through Samourai, according to government analysis. These funds originated from serious crimes, including operations on darknet markets such as Silk Road and Hydra, hacks on multiple cryptocurrency exchanges, distribution of child sexual abuse material, murder-for-hire schemes, and transactions linked to sanctioned entities in Iran, Russia, and North Korea. The developers collected approximately $6.3 million in fees, which equates to around 246.3 BTC—now valued at about $26.9 million due to Bitcoin’s price surge.

Both founders pleaded guilty in July to one count of conspiracy to operate an unlicensed money transmitting business involving known criminal funds. This plea led to the dismissal of more severe charges, including conspiracy to commit money laundering and sanctions violations, which could have resulted in up to 20 years each. Sentencing for Rodriguez is set for November 6 at 11:00 a.m. ET, followed by Hill’s on November 7. While the probation office suggested 42 months for each, prosecutors are advocating for the full five years under 18 U.S.C. § 371.

This prosecution underscores broader regulatory pressures on cryptocurrency mixers. For comparison, Roman Storm, a developer of Tornado Cash, was convicted in August of similar conspiracy charges, though a jury deadlocked on money laundering and sanctions evasion counts. The U.S. Treasury Department had sanctioned Tornado Cash in August 2022, estimating $7 billion laundered since 2019, including by North Korea’s Lazarus Group. Although those sanctions were later ruled unlawful and lifted, criminal proceedings continued, sparking debates among privacy advocates about the legality of developing open-source anonymity tools.

Legal experts, such as those cited in reports from the Southern District filings, emphasize that this case sets a precedent for holding developers accountable when their tools knowingly aid criminal activity. “The line between privacy innovation and facilitating crime is increasingly blurred in crypto regulation,” noted one analyst familiar with the matter, highlighting the need for clearer guidelines in the industry.

Frequently Asked Questions

What charges did the Samourai Wallet founders plead guilty to?

The founders, Keonne Rodriguez and William Lonergan Hill, pleaded guilty to conspiracy to operate an unlicensed money transmitting business involving funds from criminal activities, such as drug trafficking and hacks. This plea avoided steeper charges that could have led to 20-year sentences, focusing instead on a maximum of five years under federal conspiracy statutes.

Why is the Samourai Wallet case important for cryptocurrency privacy tools?

The Samourai Wallet case marks one of the U.S. government’s most aggressive actions against crypto developers, signaling that building and marketing mixing services as criminal havens can result in severe penalties. It raises questions for voice searches on whether open-source privacy features cross into illegal territory, potentially impacting future innovations in blockchain anonymity.

Key Takeaways

• Active Promotion of Illicit Use: Prosecutors highlighted chats and forum posts where developers encouraged criminals, distinguishing this from passive tool provision.
• Substantial Financial Gains: The pair earned $6.3 million in fees from laundering over $237 million, with Bitcoin’s value now amplifying their proceeds to nearly $27 million.
• Regulatory Precedent: This case, alongside Tornado Cash, warns crypto developers to prioritize compliance; consider consulting legal experts before launching privacy-focused services.

Conclusion

The push for maximum five-year sentences against Samourai Wallet founders underscores the U.S. government’s commitment to curbing cryptocurrency’s role in money laundering. By actively courting criminal users and facilitating the movement of illicit funds from darknet markets to sanctioned entities, Rodriguez and Hill now face significant consequences under unlicensed money transmitting laws. As this case and similar ones like Tornado Cash demonstrate, the intersection of crypto mixing services and regulation is fraught with risks. Looking ahead, the crypto industry must navigate stricter compliance to foster innovation while deterring criminal exploitation—stay tuned for the November sentencings and their broader impact on blockchain privacy.