Samourai Wallet Case: Feds Reject Evidence Suppression Claims

Samourai Wallet Case: Prosecutors Reject Evidence Suppression Claims

US federal prosecutors have refuted allegations of evidence suppression in the case against the co-founders of the cryptocurrency mixing service, Samourai Wallet. They maintain that their disclosure of communications with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) adhered to legal timelines.

In a May 9th letter to a Manhattan federal court, prosecutors countered a request for a hearing, stating they provided "all known substantive communications" between their office and FinCEN regarding Samourai "months before pretrial motions and the trial." They emphasized that the defense would have seven months to utilize this information before trial, deeming further action unnecessary.

The Defense's Argument

On May 5th, Samourai co-founders Keonne Rodriguez and William Hill petitioned the court for a hearing, alleging that prosecutors were late in disclosing FinCEN’s guidance. FinCEN representatives reportedly informed prosecutors six months before the charges that, in their view, Samourai wouldn't qualify as a "Money Services Business" requiring a license.

Despite this, prosecutors indicted the pair in February 2024 on charges of conspiracy to operate an unlicensed money transmitting business and money laundering conspiracy. The charges were unsealed, and the arrests were made in April 2024. Both defendants have pleaded not guilty.

Prosecutors' Response

Prosecutors asserted that they acted in good faith, disclosing the contents of an informal conversation between them and FinCEN officials, Kevin O’Connor and Lorena Valente. They characterized the comments as "individual, informal, and caveated opinions" regarding Samourai's licensing requirements under FinCEN regulations.

An email from a prosecutor summarizing an August 2023 call with FinCEN indicated that because Samourai didn't hold custody of cryptocurrency, it "would strongly suggest that Samourai is NOT acting as an MSB." However, the email also noted that FinCEN staff "did not have a sense of what FinCEN would decide if this question were presented to their policy committee."

Additional Key Points

• Samourai's lawyers argued that the FinCEN call indicated Rodriguez and Hill were not money transmitters and couldn't be prosecuted for lacking a license.
• The defense also sought to dismiss the case based on a memo from Deputy Attorney General Todd Blanche, stating the Justice Department wouldn't prosecute crypto mixers for unwitting regulatory violations. Prosecutors argued the court shouldn't consider this memo, as it doesn't create legal rights or benefits against the US.

This case highlights the complexities of regulating cryptocurrency businesses and the ongoing legal battles surrounding the interpretation of existing financial regulations in the digital asset space. Codeum, a leader in blockchain security and development, offers services including smart contract audits, KYC verification, and custom smart contract development to help navigate these complex regulatory landscapes. Contact us to learn more about our comprehensive solutions.