Crypto shock: Samourai Wallet founders admit guilt in Bitcoin privacy case

In an unexpected turn of events, developers of the privacy-focused bitcoin (BTC) wallet Samourai have changed their plea, admitting guilt on one count in an attempt to reduce their possible sentence.

According to multiple media reports, Keonne Rodriguez and William Lonergan Hill will now plead guilty to conspiracy to operate an unlicensed money transmitting business, while avoiding charges related to money laundering conspiracy.

"Federal sentencing guidelines for the two charges together would have been 160-210 months, but the maximum for the money transmission charge is 60 (five years)," Zack Shapiro, managing partner at the law firm Rains, said, adding that Samourai Wallet (SW) developers have also agreed not to appeal their sentence if it’s five years or less.

Sentencing is estimated to be announced on November 6th this year.

Moreover, as Bitcoin Magazine reporter Frank Corva reported from the court, Rodriguez and Hill also have to pay $6.4 million to satisfy the total amount of assets they agreed to forfeit to the court: $237.8 million.

Samourai Wallet offered BTC mixing services that help improve bitcoin users’ privacy by obfuscating transaction history. The website of the wallet was seized, and Rodriguez and Lonergan Hill were arrested in April 2024. Back then, prosecutors claimed that SW helped launder more than $100 million, while the arrested developers made $4.5 million in fees.

"Keonne, who was required by the judge to state his criminal conduct in his own words, gave a careful allocution that accurately stated it was the SW users, and not the software, that 'transmitted funds,'" Shapiro added.

However, while crypto industry players welcomed the deal, they emphasize that developers are still at risk due to outdated legislation.

"Tough to see [the Department of Justice, DOJ] get away with the false accusation that devs of non-custodial software are engaged in money transmission. Section 1960 is a grave threat to developer freedom. It must be amended," said Jake Chervinsky, Chief Legal Officer at Variant, a crypto fund.

"Section 1960" refers to 18 US Code § 1960, which prohibits unlicensed money transmitting businesses.

"These pleas don't change the fact that the DOJ misinterprets Section 1960 whenever they accuse a noncustodial software dev of 'transferring funds on behalf of the public.' And they don't change the work we have to do: making sure the DOJ cannot continue to misapply this law," Amanda Tuminelli, Executive Director and Chief Legal Officer at DeFi Education Fund, said.

Meanwhile, another trial is still ongoing in the US, where Roman Storm, developer of the crypto mixer Tornado Cash, is facing charges for conspiracy to operate an unlicensed money transmitting business, conspiracy to commit money laundering, and conspiracy to commit sanctions violations.

In either case, both Tornado Cash and Samourai Wallet can still be used, as they are both open source, while more privacy-preserving wallets, such as Wasabi, are also operational.