Bitcoin privacy and coin mixing service Samourai is having a big week in court, with both co-founders facing charges of conspiracy to launder money and conspiracy to operate an unlicensed money transmitter in the Southern District of New York.

William Lonergan Hill and Keonne Rodriguez are accused by the FBI of facilitating at least $100 million worth of money laundering transactions for illegal operatives. 

Although the two men appeared together in a US courtroom for the first time this week, there wasn’t much legal action of consequence. Nevertheless, proceedings in another coin mixer case involving are set to have a significant bearing on Samourai’s defense.

First things first, the duo opened their day on Wednesday in front of the judge to request a delay of their trial date. They asked for more time to review several terabytes of discovery data that they received less than five weeks ago.

Despite characterizing the size of the data through metaphors like “to the moon and back 22 times” or “75% of the amount of information in the Library of Congress,” the judge denied their request and scheduled a follow-up hearing to discuss the data for December 17 at 10am.

Rodriguez also requested freedom from home detention and his physical geolocation tracker, however, the judge denied this request.

Read more: Who are Samourai Wallet’s Keonne Rodriguez and William Lonergan Hill?

Control of user funds: Precedent from Tornado Cash

Despite the topic of Samourai’s control of users’ funds not coming up during this week’s court proceedings, because Tornado Cash and Samourai were similar privacy and coin mixing services, some of their legal issues overlap.

Specifically, whether Tornado Cash or Samourai ever controlled their users’ funds while transmitting them is a critical legal issue.

By deciding an issue in the Tornado Cash case (U.S. v. Roman Storm and Roman Semanov), US District Court Judge Katherine Polk Failla will set precedent over whether Samourai’s ‘control’ (or lack thereof) of its users’ coins was a prerequisite for its operation of an unlicensed money transmission business.

For context, Hill and Rodriguez argue that they never controlled users’ bitcoin through Samourai, supposedly making it impossible for them to have transmitted money that they never controlled in the first place. The FBI disagrees, arguing emphatically that control of money is not a prerequisite of money transmission.

Roman Storm is on a $2 million bond to appear in court on November 30. By that date, legal experts anticipate that Judge Failla will announce her decision over the contentious ‘control’ issue in the Tornado Cash proceeding.

If Judge Failla decides that control is a prerequisite for money transmission, it will be a win for Samourai. If the judge decides that control is not a prerequisite, Samourai’s co-founders’ arguments that they never controlled users’ funds will lose a substantial portion of its defensive power.

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The post Samourai and Tornado Cash both pinning hopes on upcoming ruling appeared first on Protos.

So, you’ve used the bitcoin mixing service Samourai Wallet. Its founders have been arrested, its domain is seized, and five different law enforcement agencies have issued joint press releases about the alleged crimes it perpetrated. What should you do?

To begin, you should probably do what you should have done in the first place — follow the law. While it’s almost always legal to transact online, store data on Bitcoin’s blockchain, and use node and wallet software, it is illegal to use Bitcoin to do certain other things.

For example, it is a crime to evade taxes; to intentionally launder the proceeds of others’ crimes; or to conspire with or assist others in breaking the law.

It’s also a crime to avoid cash-like reporting requirements — and there are many cash reporting requirements. For example, most US business owners who pay any worker more than $600 (soon rising to $5,000) per year need to file a Form 1099. Most cash-like transactions exceeding $10,000 are also subject to Form 8300 reporting requirements.

While a full discussion of the legality of Samourai or other coin mixers is beyond the scope of this article, ensuring that you follow the law should remain your top priority.

Read more: Who are Samourai Wallet’s Keonne Rodriguez and William Lonergan Hill?

How to stay private without Samourai Wallet

Next, and assuming you have always followed the law, there are some practical steps you can take to disentangle yourself from the shuttered coin mixer. Although it’s generally legal to use privacy tools for non-criminal purposes, Samourai Wallet is seized and no longer operates.

Moreover, many coin mixers have suspended coin mixing services, including Sparrow Wallet’s integration with coin mixer Whirlpool. Sparrow terminated that privacy service a couple of hours ago.

Therefore, if you want to keep your bitcoin private, you must use the rapidly dwindling services that remain.

Bull Bitcoin founder and privacy advocate Francis Pouliot wrote a quick how-to guide. He recommends a series of actions that could remove a leak of your Bitcoin wallet’s xpub (the master index of all public keys belonging to one private key). Spoiler alert: It’s hard work.

First, a user following Pouliot’s suggestion would need to create several wallets using Wasabi, a European coin mixing service that competed with Samourai. Next, the user should send each UTXO of their bitcoin balance to unique Wasabi wallets. Finally, they should initiate CoinJoin or Join Market transactions to anonymize bitcoins from those wallets.

If a user carefully follows these steps, Pouliot argues, they should be able to privately disentangle their Bitcoin wallet from Samourai’s shuttered service.

Good luck!

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The post What to do if you’ve used Samourai Wallet appeared first on Protos.

Samourai Wallet has had its website seized, its app removed from the Google App Store, and two of its lead developers — Keonne Rodriguez and William Lonergan Hill — arrested.

According to a press release from the Department of Justice (DoJ), 35-year-old Rodriguez and 65-year-old Hill helped to move $100 million worth of laundered funds and facilitated over $2 billion worth of unlawful transactions.

Samourai Wallet, a cryptocurrency mixing service, was well-known in the industry for its abrasive social media presence and for flouting rules and regulations. It also welcomed Russian oligarchs to the platform when US sanctions began.

According to Rodriguez’s LinkedIn profile, he’s an Oxford graduate, and Hill says he attended the French National Conservatory of Arts. The pair are listed as directors of a now-dissolved UK company called Katana Cryptographic LTD and both claim to have held positions at a company called Consign Holdings AB.

Read more: Vitalik Buterin endorses one of North Korea’s favorite coin mixers, Railgun

What else do we know?

Last year a Toronto-based cryptocurrency investment company called Cypherpunk Holdings apparently invested over $100,000 CAD in Samourai Wallet, though how it planned to earn money on the investment is unclear. Additionally, Hill was CTO at Soie LLC, a Wyoming-based company that was “seed funding privacy projects.” The X profile for the company is simply retweets of endorsements for Samourai Wallet.

It’s also worth noting that while the ‘samouraiwallet dot com’ website shows a seizure notice from numerous governmental agencies, the actual domain listed by the DOJ — samouraiwallet dot io — doesn’t have a seizure notice and is simply a broken link.

This may have to do with the fact that the US almost exclusively seizes dot com, dot net, and dot org domains.

Additionally, other services created by the developers at Samourai, such as its blockchain explorer OXT, are still up and running.

Rodriguez and Hill face two charges, one for conspiracy to commit money laundering (which carries a possible 20-year sentence) and another charge for conspiracy to operate an unlicensed money-transmitting business. This carries a possible five-year sentence.

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The post Who are Samourai Wallet’s Keonne Rodriguez and William Lonergan Hill? appeared first on Protos.

Ethereum founder Vitalik Buterin has sent more than $300,000 to coin mixer Railgun which has also been used by North Korea’s Lazarus Group.

Buterin has been using the service for months, — albeit with smaller sums of money — and today he took a definitive stand in support of it and other coin anonymizing services.

In addition to sending 100 ETH through Railgun, he posted a defense of his actions, claiming “Privacy Is Normal” — a phrase borrowed from Zcash. Buterin defended Railgun in particular, claiming that its novel use of zero-knowledge proofs allows users to demonstrate the lawful origin of funds without doxxing transaction histories.

Railgun uses smart contracts to prove membership within ‘custom association sets’ to satisfy certain regulations.

Buterin has advocated for private transactions for years and has spoken positively about Zcash, Monero, privacy-preserving rollups, stealth addresses, and the cryptographic privacy of zero-knowledge succinct non-interactive arguments of knowledge (ZK-SNARKs).

Read more: US Treasury sanctions OTC traders for aiding Lazarus hackers

Coin mixers like Railgun attract bad actors

Financial opacity also attracts bad actors. One of the first use cases for cryptocurrency was facilitating illegal e-commerce via Silk Road. Similarly, Railgun’s privacy has attracted nefarious operators. These include Lazarus Group, the most notorious blockchain hacking group closely tied to North Korea and China.

Lazarus Group has been sanctioned by the US Treasury’s Office of Foreign Assets Control since September 13, 2019 and support for the group is illegal. Lazarus is a frequent user of Railgun.

Nevertheless, crypto’s wealthiest billionaire has unapologetically endorsed one of the tools that Lazarus Group uses. In his words, “privacy is normal,” and anyway, Railgun “makes it much harder for bad actors to join the pool.” 

Much harder for bad actors. How reassuring.

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