- The founders of Samourai Wallet have been arrested and charged with facilitating over $2 billion in unlawful transactions
- US and Icelandic authorities collaborated to shut down the site, accusing the pair of laundering $100 million worth of criminal proceeds
- The crypto community called the actions an assault on privacy
The crypto community reacted with fury yesterday when it was revealed that the founders of the Samourai Wallet had been arrested and charged with $2 billion worth of unlawful transactions. Authorities in the US and Iceland worked together to close down the site and its mixing service, accusing Keonne Rodriguez and William Hill of facilitating over $2 billion in anonymous transactions, mostly from criminal activities, between around 2015 to February 2024. Many in the crypto space responded in the same way that they did when Tornado Cash was given the same treatment, arguing that the pair’s only crime is writing code and seeing it as another attack on the privacy with which cryptocurrencies are supposed to be imbued.
$100 Million Worth of Criminal Proceeds Laundered
News of the arrest and shutdown came yesterday through a press release from the US Attorney’s Office, Southern District of New York, which stated that Rodriguez and William Hill had been charged with operating an unlicensed money-transmitting business that executed over $2 billion in unlawful transactions and laundered over $100 million in criminal proceeds.
The statement claimed that Samourai Wallet, with its built-in mixing service, was marketed as a privacy-enhancing tool but instead served as an unlicensed money-transmitting business, leveraging its unique features to enable anonymous financial transfers. The fees from these transfers allegedly earned Rodriguez and Hill some $4.5 million, with authorities arguing that, despite its outward presentation as a privacy-focused service, Samourai functioned as a haven for criminal activities, aiding in extensive money laundering and sanctions evasion schemes.
A significant portion of the transactions processed through Samourai during this period involved illicit funds, including proceeds from illegal dark web markets such as Silk Road and Hydra Market, wire fraud and computer fraud schemes, and various other criminal activities.
Samourai Tech Obfuscated Origins
Samourai operated through a centralized server, enabling users to store private keys for their Bitcoin addresses within the application. While the platform did not have access to users’ private keys, it facilitated transactions and created new Bitcoin addresses, essential for executing transactions among Samourai users.
Two prominent features of Samourai, namely “Whirlpool” and “Ricochet,” were specifically designed to aid individuals involved in criminal activities in concealing the origins of their illicit proceeds. Whirlpool facilitated cryptocurrency mixing by coordinating exchanges between users to obfuscate the traceability of funds on the blockchain, while Ricochet introduced additional intermediate transactions (“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 processed over 80,000 BTC transactions, translating to more than $2 billion based on contemporaneous BTC-USD conversion rates. Samourai profited from these services, accumulating an estimated $3.4 million from Whirlpool transactions and $1.1 million from Ricochet transactions during the same timeframe.
Privacy on the Ropes
There was an outcry in the crypto space at the news, with many stating that Rodriguez and Hill had done nothing wrong and that the closure and arrests were yet more attempts to strip privacy from crypto users:
The developers of Samourai were arrested this morning.
One extradited from Portugal.
Samourai is a bitcoin wallet that makes bitcoin private.
These developers face up to 25 yrs in prison for writing code.
The US is sending a message.
No transaction will be private. pic.twitter.com/GupLtMuHD8
— RYAN SΞAN ADAMS – rsa.eth 🦄 (@RyanSAdams) April 24, 2024
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
This case, of course, comes hot on the heels 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.
Rodriguez and Hill were both arrested on Tuesday, with Rodriguez awaiting an appearance before a US Magistrate Judge in the Western District of Pennsylvania. Hill was arrested in Portugal, leading to the US seeking extradition so he can stand trial.
