DOJ thinking transactions are an Unregistered Money Transmission Business

[NotATether]

Why it is possible the DOJ might rule wallet transactions as unregistered money transmission

If you have not been out of the loop, you will have heard the news that Samourai Wallet was seized by the US government yesterday. Two people running the project were arrested as part of that, and they have been charged with (you guessed it) money laundering and operating an unregistered money transmission business.

That is what the indictment says (and I got the excerpt from over here).

COUNT TWO
(Conspiracy· to Operate an Unlicensed Money Transmitting Business)
The Grand Jury further charges:
31. The allegations contained in paragraphs 1 through 28 of this Indictment are
repeated and realleged as if fully set forth herein.
32. From at least in or about 2015 up to and including in or about February 2024, in the
Southern District of New York and elsewhere, KEONNE RODRIGUEZ and WILLIAM
LONERGAN HILL, the defendants, and others known and unknown, willfully and knowingly
combined, conspired, confederated, and agreed together and with each other to commit an offense
against the United States, to wit, operation of an unlicensed money transmitting business, in
violation of Title 18, United States Code, Sections 1960(b )(1 )(B) and (b )(1 )(C).
33. It was a part and object of the conspiracy that KEONNE RODRIGUEZ and
WILLIAM LONERGAN HILL, the defendants, and others known and unknown, would and did
knowingly conduct, control, manage, supervise, direct, and own all and prut of an unlicensed
money transmitting business, which affected interstate and foreign commerce, and (i) failed to
comply with the money transmitting business registration requirements under Section 5330 of Title
31, United States Code, and regulations prescribed under such section, and (ii) otherwise involved
the transportation and transmission of funds that were known to the defendants to have been
derived from a criminal offense and were intended to be used to promote and support unlawful
activity, to wit, RODRIGUEZ and HILL conducted, controlled, managed, supervised, directed,
and owned all or part of Samourai, a business that transferred funds on behalf of the public, without meeting the Federal registration requirements set forth for money transmitting businesses...

Now let's get the ducks in a row:

- Samourai Wallet was not a company, it was an open source project.
- The Whirlpool coordinator was software that ran on their computer servers, and was not ran as a business.
- The primary function of Samourai Wallet is a bitcoin wallet, not to transfer money on behalf of random users.
- CoinJoins are not money transmitters in the same way that regular Bitcoin transactions are not money transmitters.

So, given that Samourai Wallet is just a bitcoin wallet, that performs Bitcoin transactions, and the government is hell-bent on winning the case, then this might cause them to rule that bitcoin wallet transactions are unregistered money transmitters and are hence illegal.

What do you think of this? Do you think the DOJ will go that far? Or do you think they will hand out some other kind of charge? Do you think they will win the case?

[Zed0X]

We know it's not just about money transmission why they seized Samourai. If we go by their allegations, all wallets (including regular non-custodial) will have to require identification from their users and register their service to authorities.

I'll leave it to the defendant's lawyers how they will present their arguments. I think the prosecutors would zone in on the mixing/coinjoin feature of the wallet.

[TomPluz]

I'll leave it to the defendant's lawyers how they will present their arguments. I think the prosecutors would zone in on the mixing/coinjoin feature of the wallet.

I agree that this can be the very focus of the case against the two founders of Samourai Wallet for money laundering as we know that the government is not so friendly to mixing business and maybe they have the assumption that is something is hidden then something shenanigan can be behind the transactions. I am sure that this can be a landmark case that can define many things and can either prod the US government via its DOJ to file more cases under similar circumstances in the cryptocurrency industry or it would retract and stop its overreach not unless the defendants would opt for a more friendly settlement so as not to prolong the agony, so to speak.

[Faisal2202]

What do you think of this? Do you think the DOJ will go that far? Or do you think they will hand out some other kind of charge? Do you think they will win the case?

You are definitely right, as I also read the news shared by many news outlets, which are usually the same ones, well they all says according to DOJ this platform was not registered so that's why they have seized it, and of course they must have seized the funds in them as well. I already posted my POV on this in the news section but what I forgot to mention is this is a wallet as well as you have aforementioned. So does it mean people who have funds in them also lose? IMHO they are not, as funds are in 12 words not in wallets but still asked a silly question.

Besides, I think the DOJ Will definitely go far, as they gave a warning to Uniswap and now this seizure has come into being. I guess they are trying to diverge the focus of the crypto community like a few days ago they sent a notice to Uniswap but seized Samourai. This all is just an accuse to make some funds, as seized funds is there now. They are really abusing there power in the name of saving community But if Samourai is really guilty then I have no issue with this ban.