Defense Seeks Bail Amendments

In part to cover his legal bills, Rodriguez’s defense lawyers sought two changes to his bail: elimination of a home detention mandate and lessened limits on his ability to interact with cryptocurrencies.

But considering the seriousness of Rodriguez’s offense, the possibly long sentence should he be proven guilty, and handwritten notes purportedly outlining an escape plot, prosecutors effectively claimed Rodriguez should be considered a flight risk.

Allegations and Bitcoin Privacy Tools

Rodriguez, co-founder William Lonergan Hill, former CTO of Soie LLC., and product lead at Blockchain.com before working on Samourai, face money laundering allegations in relation to the development of the Samourai Wallet, a bitcoin-focused app with a privacy-preserving mixing tool to hide user identities. Prosecutors claim the non-custodial Samourai Wallet helped to enable over $2 billion in illegal activities.

For many Bitcoin supporters, who perceive the two developers arrested during over a decade of operation as government overreach, the case has evolved into something of a cause celebre. Legal analysts specifically worry that an unfavorable decision for Rodriguez and Hill will allow authorities to target any non-custodial software based on precedent.

Senators Cynthia Lummis (R-Wyo.) and Ron Wyden (D-Ore.) penned a letter in May voicing concerns over the Department of Justice’s “unprecedented interpretation” of a statute extending prohibitions against “unlicensed money transmitting businesses” given the risks possessed to “crypto asset software services” and the lack of “clear intent” from Congress.

The senators noted that consumers of non-custodial crypto service providers retain sole possession and control of their crypto assets; hence, they cannot be categorized as money-transmitting companies. Lummis and Wyden underline that creators of autonomous software should not be responsible for the way those tools are applied.

This is basically what Rodriguez’s counsel told the court on Tuesday—that the defendant believes he did not commit a crime. For their money laundering and transmission accusations, Rodriguez and Hill each risk a 25-year maximum jail sentence.

The continuous case against co-founders Roman Storm and Roman Semanov of Tornado Cash, who helped create and promote the Ethereum-based decentralized token tumbler, raises similar questions. Judge Katherine Polk Failla of the U.S. District Court is reviewing evidence on whether founders must keep “control” of users’ crypto assets in order to be judged money transmitters.

Though the protocol is independent, a prior decision concerning Tornado Cash co-founder Alexey Pertsev in a Dutch court found him guilty of money laundering. Roman Sterlingov, the founder of Bitcoin Fog, was found guilty in April on like allegations.

Tuesday was the first time Rodriguez and Hill had shown up in court together since they were arrested. December 16 is the scheduled trial date.

Rodriguez tweeted, “Bitcoin isn’t about buying a latte with your mobile phone; it is about making the transactions they say you can’t make,” around the time Samourai launched.

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Defense’s Argument for Hill’s Bail

According to a recent letter from Hill’s defense, the parties have agreed to bail Hill but are still split on where his time ought to be spent. The defense contends that the 65-year-old developer, who grew up in Brooklyn before going to Paris and then Portugal, should be allowed to stay in Portugal with his wife.

According to the lawsuit, first reported by the publication The Rage, Department of Justice officials would like Hill to remain in his sister’s Brooklyn basement.

Rodriguez was released on a $1 million bond after pleading not guilty to the two charges. Hill’s “extraordistically strong bail package,” according to the letter, included at least $3 million in assets.

Should the court approve Hill’s release to Portugal, that package would rise to almost $4.4 million, funded by commitments from his wife and relatives, who “all have bet their financial futures on his abiding by the terms of the bond,” the letter says. 

Samourai Wallet’s Legal Controversy

The letter states that Hill intends to challenge the charges, as does his fellow founder. Hill’s attorney observes that the real trial might not take place until “deep into 2025,” given that discovery in the case is expected to be substantial, and together with many other pre-trial activities, there may not be any actual trial at all.

From legal analysis to notes of support from well-known people, Hill’s lawyer also outlines some points in support of Hill in the letter, offering a preview of the defense’s claims in the next case.

Related: Samourai Wallet Charged with Money Laundering Conspiracy

In one intriguing case, Hill’s attorney notes that Samourai Wallet was on Google’s software store from its introduction in May 2015 until April 2024, at which point Google removed the software following the arrest of the two co-founders.

Should Samourai Wallet be meant as a money-laundering tool, the defense contends that government reasoning would make Google an unindicated co-conspirator for distributing the program to the almost 4 billion Android users worldwide.

Moreover, the defense contends that, notwithstanding FinCEN’s advice at the time, the charge of conspiracy to commit money laundering relies on Samourai Wallet’s unlicensed money-transmitting status. The letter says, “If Samourai Wallet was not a money-transmitting business, it had no obligations to prevent money laundering under the (Bank Securrency Act).”.

Support from Senators

Also included in the file is a letter from bipartisan pair Senators Cynthia Lummis and Ron Wyden to Attorney General Merrick Garland arguing, “Subjecting developers of non-custodial crypto asset software to potential criminal liability as unregistered money transmitters contravenes the well-established interpretation of (FinCEN’s guidance) and will only serve to stifle innovation and shake confidence in the DOJ’s respect for the rule of law.”

The letter states Hill is expected to make his first appearance before the U.S. District Court for the Southern District of New York on July 9 or 10.

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Keonne Rodriguez’s Bail Conditions

The court set a very demanding a $1 million bond bail bond for Rodriguez. In addition to the heavy fine, Rodriguez faces a jurisdiction issue that restricts his movement within New York or Pennsylvania areas beyond his house in Harmony, Pennsylvania. Moreover, the authorities are equipping Rodriguez with a monitoring gadget to continuously monitor his movements.

The most notable bail requirement is the prohibition against Rodriguez engaging in any cryptocurrency-related activities without first obtaining court permission. The ban extends to both direct and indirect transactions, disqualifying him from signing any contracts between the Samourai Wallet and the cryptocurrency world.

Crackdown on Cryptocurrency Mixers Intensifies

William Hill, the CTO of Samourai Wallet, and another defendant have been detained, while Rodriguez has been released on $100,000 bail. Interestingly, authorities arrested Hill in Portugal and are currently awaiting extradition to the United States of America. As a result, he remains behind bars, and this has caused a lot of delay in the court’s arrangements for his case.

We cannot undervalue the gravity of the accusations facing both Rodriguez and Harris. In the event of a guilty verdict, they may each receive 20 (twenty) years and, additionally, five years of imprisonment for money laundering conspiracy and illegal, unlicensed money-transmitting business operation. On the other hand, authorities have promptly taken the Samourai Wallet’s servers and domain into their possession, an additional measure that aids in the further disruption of the platform.

The arrests of these individuals are part of a broader crackdown on cryptocurrency mixers by U.S. authorities, who allege that hackers and terrorists have been using these mixers for money laundering. This is the next step after the U.S. Treasury Department sanctioned several other mixers, including Blender and Tornado Cash, although the move caused disputes among the industry and government representatives.

When Rodriguez is ready for his court hearing on May 14, it is still uncertain what the result of this legal struggle will be. Hence, this amendment serves as a reminder of the need for increased regulatory supervision of cryptocurrency platforms and the impediments they bring to their use in illicit activities.

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