US court hands four- and five-year prison terms, highlighting regulatory risks for non-custodial crypto mixers.
The co-founders of privacy-focused Samourai Wallet have been sentenced to four and five years in prison for operating an unlicensed money-transmitting business. The case underscores the Department of Justice’s (DOJ) evolving stance on crypto mixers, raising important questions about privacy, decentralization, and compliance in the digital-asset space.
Money Transmitter Theory in Practice
Keonne Rodriguez and William Lonergan Hill were convicted of conspiring to operate an unlicensed money-transmitting business and facilitating transactions involving criminal proceeds. Prosecutors argued that Samourai’s Whirlpool CoinJoin service helped conceal illicit fund movements, even though the wallet was fully non-custodial.
US Attorney Nicolas Roos emphasized, “The sentences the defendants received send a clear message that laundering known criminal proceeds—regardless of the technology used or whether the proceeds are in the form of fiat or cryptocurrency—will face serious consequences.”
Court documents noted that all Whirlpool transactions were coordinated through Samourai’s servers, including broadcasting Ricochet transactions to the Bitcoin network. Prosecutors maintained that this constituted money transmission without the necessary FinCEN licenses.
Decentralization and Legal Boundaries
Similar to the Tornado Cash case, the Samourai Wallet prosecution illustrates that non-custodial design alone is insufficient to avoid regulatory scrutiny. DOJ documents highlighted that the co-founders did not implement KYC or AML programs, a key factor in the ruling.
Roman Storm, co-founder of Tornado Cash, warned the crypto community that “any decentralized, non-custodial service could be construed as requiring custodial oversight under current DOJ interpretations.”
Privacy advocates note that legal outcomes can vary. In January, a court overturned Tornado Cash sanctions, ruling that smart contracts are not property under OFAC rules, limiting government authority. However, conspiracy convictions for operating an unlicensed money-transmitter business remain enforceable.
The Samourai Wallet sentencing reinforces DOJ’s theory that crypto mixers can be treated as money transmitters, even when fully non-custodial. Developers and investors in privacy-focused projects must carefully navigate compliance requirements, as the line between legal innovation and criminal liability remains under close scrutiny.
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Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.