Keonne Rodriguez and William Hill face five years in prison: the government accuses the developers of actively promoting money laundering through the wallet.
According to The Rage, the United States Department of Justice has requested the maximum sentence of five years imprisonment for Keonne Rodriguez and William Hill, the creators of Samourai Wallet who pleaded guilty to conspiracy to operate unlicensed money transmission services earlier this year.
According to the prosecution, the Samourai developers did not simply provide a privacy tool used indirectly by criminals, but deliberately “solicited criminal activity” by designing the service specifically for money laundering. The defense has instead requested that the sentence be limited to time already served in detention.
The prosecution’s memorandum states that the developers facilitated the laundering of “at least $237 million from drug trafficking, darknet marketplaces, computer intrusions, fraud, murder-for-hire schemes, and a child pornography site” through Samourai Wallet. The allegations related to murder-for-hire and child pornography had never been mentioned previously.
“The defendants’ crimes are not based on a regulatory gap, but on the unequivocal desire, intent, and actions taken to help criminals launder money and evade sanctions through Samourai Wallet,” the indictment reads. The charge of conspiracy to evade sanctions, which also carried a maximum sentence of twenty years, was dropped in exchange for the developers’ guilty plea.
The prosecution argues that Samourai Wallet’s very design as a privacy-oriented wallet constitutes a sort of endorsement of criminal activity. The document highlights how “Samourai’s website boasted that it was virtually impossible to link inputs and outputs even in a single Whirlpool transaction,” and how the Ricochet feature was designed to create “unnecessary intermediate transactions” that served as a “layering technique to make it even more difficult to determine that a particular batch of cryptocurrency actually came from criminal activity.”
The prosecution continues by citing how the website “boasted that its Ricochet functionality could assist customers in further obscuring the link between deposits and withdrawals,” describing it as “a premium tool that adds extra steps of history to your transaction” and would allow customers to “confuse blacklists and protect themselves against unfair account closures by third parties.”
From money laundering to privacy: the charges change course
A controversial element of the case concerns the fact that the prosecution’s sentencing memorandum makes scant reference to the charge of conspiracy to operate an unlicensed money transmission service, the only charge to which the developers pleaded guilty.
Despite the dismissal of charges for conspiracy to launder money and conspiracy to evade sanctions, the prosecution’s document relies almost entirely on the assertion that the developers built Samourai Wallet to profit from money laundering and sanctions evasion, going so far as to state that “Rodriguez and Hill were promoting Samourai to criminal darknet users, and not to mainstream cryptocurrency users.”
The memorandum cites an exchange on X between Rodriguez and a Samourai user about censorship resistance, highlighting that “Rodriguez referred to bitcoin as ‘black market money.'” As the government states, “Rodriguez and Hill were not merely passive observers – they wanted and intended criminals to use Samourai to launder proceeds of crimes, and they advertised Samourai accordingly,” citing pages of private messages and forum posts in which the developers referred to Samourai as similar to a laundry service. Hill has since admitted to “regretting our approach to marketing the service.”
The technical controversy: developers could “demix” transactions
The memorandum argues that “it appears Hill’s primary concern was not fidelity to anonymity, but hostility toward forensic firms–like Chainalysis–known for assisting law enforcement.”
But the developers “did not always practice what they preached,” the prosecution states. According to the document, “as confirmed by law enforcement’s seizure and analysis of Samourai’s servers, despite claiming that Samourai was a ‘privacy’ service, Rodriguez and Hill retained sufficient information to track or ‘demix’ their mobile users’ Whirlpool transactions.”
The prosecution here refers to a main point of criticism of Samourai’s design by competitors and privacy advocates, in which users who did not run their own node provided their extended public key (XPub) to the Samourai Wallet coordinator, allowing the developers to cross-reference transactions.
However, according to The Rage, the memorandum erroneously assumes that “there was no technical or operational necessity to do so.” As Hill clarifies, “the necessity to collect this ‘XPUB’ data was driven by the functional necessity to calculate balances” while operating a light wallet, noting that only about 20% of users were affected by this design choice.
The developers’ defense
Hill and Rodriguez’s sentencing letters paint a different picture from that presented by the prosecution, asking the court to sentence the developers to time already served.
“I deeply believe in the idea of freedom and protection from government overreach, and I rationalized my actions as promoting these ideas,” Hill writes to Judge Cote overseeing the case.
“I co-founded a software company to develop tools that could provide the anonymity necessary to make Bitcoin work as intended. I made it clear that I was moving away from the general direction taken by the industry at that time: Bitcoin as a short-term investment vehicle; get-rich-quick schemes; and various other fraudulent behaviors. I focused on Bitcoin as digital cash and everything this entailed in terms of personal independence.”
Hill states he prioritized work on Bitcoin’s privacy and fungibility because he believed that “the benefits provided by Bitcoin as true digital cash, in terms of personal financial privacy, protection from political persecution, protection from physical attack, outweighed all the negative effects arising from the use of Bitcoin for illegal and nefarious activities.”
Hill also emphasizes being “convinced that our work was legal. I studied the FinCEN guidelines and related comments and designed the features of our app to avoid being considered a money transmission business. I understood this meant the company was legal, and while I knew there was a risk that the law could change and the company would become illegal, I didn’t think we were breaking the law because we never took custody of any funds. My understanding was further reinforced when retained legal counsel provided the same opinion in 2020.”
Rodriguez similarly argues that Samourai’s development served the purpose of alleviating privacy concerns inherent in Bitcoin’s infrastructure, emphasizing that he also believed he was “working within legal boundaries. We had legal counsel who told us our operations were compliant.” Rodriguez’s defense also highlights his work on OXT, a publicly available blockchain tracking solution to help crime victims trace stolen funds.
Sentencing is scheduled for November 6 and 7 at the Southern District of New York.
