DOJ Charges Founders & CEO Of Cryptocurrency Mixing Service Arrested And Charged With Money Laundering And Unlicensed Money Transmitting Offenses
On April 24, 2024, the U.S. Attorney's Office for the Southern District of New York unsealed an indictment charging Keonne Rodriguez and William Lonergan Hill, the founders and CEO of Samourai Wallet, with serious financial crimes involving their cryptocurrency mixing service.
So what is an unlicensed money transmitter and how does it relate to money laundering? Let's discuss ...
Background: Samourai Wallet, developed by Rodriguez and Hill, offered a cryptocurrency mixing service called "Whirlpool" and an additional service named "Ricochet". The service purportedly facilitated over $2 billion in transactions, with more than $100 million allegedly linked to money laundering from illegal activities, including dark web marketplaces and other fraudulent schemes. The indictment follows a series of arrests and coordinated actions by U.S. and international law enforcement agencies, resulting in the seizure of Samourai’s web infrastructure and cessation of its app’s availability in the U.S.
Operating an Unlicensed Money Transmitting Business (18 U.S.C. § 1960) Legal Elements: Conduct of Business: The government must prove that defendants managed or operated part or all of Samourai, a money transmitting business. Licensing: DOJ must also be prove that Samourai operated without the necessary state or federal licenses required for money transmission. Knowledge: DOJ also needs to demonstrate that the defendants were aware that their operation lacked the required money transmitter license. Penalty: Violation of this statute can result in up to five years of imprisonment.
Conspiracy to Operate an Unlicensed Money Transmitting Business (18 U.S.C. § 371) Legal Elements: Agreement to Commit the Illegal Act: There must be proof of an agreement, either explicit or implicit, among the defendants to engage in unlicensed money transmission. Intent: The conspirators must have intended to carry out the unlicensed operations. Overt Act: There needs to be at least one overt act that furthered the conspiracy, which could be any act that helped continue the illegal business.
Money Laundering: Legal Elements for 18 U.S.C. § 1956 - Laundering of Monetary Instruments: Conduct Involving Financial Transactions: Government must prove that defendants conducted financial transactions using the proceeds from the unlicensed money transmitting business. Property Derived from Specified Unlawful Activity: The transactions involved must include property derived from their unlicensed business operations. Knowledge and Intent: They must have known the property was obtained from unlawful activity and intended to promote or conceal this activity. Penalty: Up to 20 years imprisonment.