After the arrest of the founders and the government taking control of Samourai's assets, it's important for us as a community to figure out what this means for the future of privacy in crypto.
In recent years, we've seen serious global crackdowns on popular ways to keep bitcoin transactions private. Police from different countries have launched operations against mixers, seizing bitcoins, arresting key people, and shutting down several services altogether.
But with Samourai wallet, there's a twist. The developers were upfront about their goal to conceal the source of funds, but their approach was different. Unlike mixers, Samourai's methods were mostly decentralized and open-source.
So, what actually went wrong for Samourai?
I’ve got some thoughts on this, but I’d love to hear what everyone else thinks too.
Getting too confident
Samourai had a pretty solid following on social media. The founders weren't shy either they often shared bold and controversial opinions online. Here’s a brief example:
Just so you know, the link between how U.S. authorities responded and that screenshot isn’t just a guess; it's straight from the DOJ's report on the crackdown.
Offering services
The Samourai dev team didn’t just build a wallet; they turned it into a full-fledged company, complete with a service and a community. They made money through fees, selling products, giving advice, and all of this was done very openly.
Again, from the DOJ's report:
There's a chance, albeit a...
There is one other thing I saw in the DoJ report that you don't cite, that they were bragging about working for grey and black markets, so they were acknowledging working for illegal activities. If you simply defend privacy and work for it, surely you can defend yourself better when you are accused of money laundering, at least with that of plausible deniability, saying that you offer privacy and you don't know if any of your many honest customers is a criminal.
Operating a crypto mixing service knowing the negative stance of the US government against such services - this is precisely what went wrong!
It's not a surprise that US government is extremely negative about the crypto mixing services. They had taken action earlier as well if you remember the case of Chipmixer. So it's no surprise that they kept such services under constant surveillance.
If running a crypto mixer considered a crime, it's a bigger crime to try to run it from the US soil.
Russian oligarch wallet Where do these headlines come from? If I had a lot of bitcoins, I would use the original Bitcoin Core wallet for storage. The original wallet has options for secure and anonymous use.
And its true that fraudsters and criminals often use privacy tools. But a good specialist knows how to use standard wallets completely safely.
Knowing how hostile the U.S. government is towards cryptocurrency, privacy, and its geopolitical rivals, the ways in which they marketed their service were often incredibly foolish. If they were going to be this arrogant they should have made sure to develop the project in total anonymity and located in a jurisdiction with more respect towards individuals' right to privacy and financial autonomy.
The overall case against them has significant flaws. An offhanded remark made on Twitter should not be the reason why they spend decades in prison. Russian oligarchs have far better ways of laundering money through traditional investments and banking institutions. While those comments werent very tasteful, it is not enough evidence of a conspiracy to commit money laundering or evade sanctions. It would be different if they had actually been in direct communication with oligarchs, which is not the case.
The indictment documents against Samourai state that KEONNE RODRIGUEZ and WILLIAM LONERGAN HILL, the defendants,
owned, controlled, managed, and supervised Samourai, which was engaged in the business of transferring funds on behalf of the public." That is not how Whirlpool works but prosecutors are counting on jurors being too ignorant to understand that a non-custodial service does not meet the definition of a money transmitting business. Even some forum members who have many years of experience with Bitcoin did not understand that the coordinator never holds any user funds.
It will be difficult to win against a rigged justice system, but with a strong defense some of the charges might get dropped, which might limit the harm they want to inflict on privacy providers and Bitcoin users.
Let's discuss if the parties who were arrested were transferring funds on behalf of others.
If they were in fact not doing that, then how do we justify them receiving a fee for transfers done through the wallet? What was this fee for, paid by who and for what exactly? What was Samurai's purpose, why did they set up a company etc.
If Samurai was 100% decentralized and there were no owners weren't established through an official company, maybe there would be plausible deniability. FEDs could go as far as to order a code repo shut down, but who would they go after? An expansive open source dev community? Pseudonymous code authors? Decentralized network node-runners?
Certainly users who were running the Samourai software weren't receiving it from a vague or decentralized source. And in the process of running the software, they were exchanging information and financial transactions with Samourai's company directly. So I think the defense would be pretty weak in terms of the liability part.
Of course here we're always judging this based on the current network. Other jurisdictions may be affording more freedoms to open source devs to develop whatever apps however they want.
Honestly certain rulings the U.S. justice system has delivered are pretty tyrannical and more often than not when an individual or a corporation is set to fight in court against the government it's a guaranteed loss for them. Like the case of the Developer traveling to NK I mentioned in the OP, he was nearly forced to plead guilty to avoid a huge sentence.
The US government does whatever when it feels it benefits the capitalistic country or when it feels threatened and not in control of the geopolitics. You cannot be a sympathizer of a country that has been in bed with countries that are ruled by dictators. In the name of democracy, they have destroyed several countries but now they are concerned that cryptocurrency will backstab their economy and its ambitions. I think whatever they are doing now against the founder of a big exchange and mixers will only haunt them in this era of AI and Robotics.
Earlier they tried their level best to give Bitcoin a negative identity, look at them now they have launched a Bitcoin ETF which is a massive success. The US government and the deep state will either comply with Bitcoin or will find an option to make Bitcoin traceable for the common public but not for billionaires. Already there is too much negativity escalating within their universities against their policies against a known country in the Middle East.
The government has always had a negative attitude towards cryptocurrencies and intelligence agencies have always hunted for cryptomixers.I would still share the government and the policies of the intelligence services, of which there are very many in the United States, about 20.
And it looks like this: I see a new threat, here is our plan, I ask you to allocate xxx million to us
Right on all points cited (and more)
And the recent revelations that even FinCen said beforehand that they weren't a money transmitter is - or at least should be - a big problem for the prosecution.
I think this topic needs a full, dedicated thread. There's quite a few important pieces in this case that aren't in the thread. Like them or not, if this case is successful we're in a bad spot