Founders of Cryptocurrency Mixing Service Arrested for Money Laundering Offenses

Rodriguez and Hill, founders of the cryptocurrency mixing service Samourai, have been arrested for operating an unlicensed money-transmitting business and facilitating large-scale money laundering activities.

The service, operational since 2015, is accused of processing over $2 billion in transactions, a substantial portion of which were derived from criminal proceeds.

Samourai, a mobile application that Rodriguez and Hill developed to enhance privacy for cryptocurrency transactions.

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The app, downloaded over 100,000 times, allows users to store private keys for Bitcoin addresses and facilitates transactions through a centralized server.

This setup enabled users worldwide, including those in the United States, to engage in cryptocurrency transactions with enhanced anonymity.

Criminal Features and Financial Transactions

Samourai offered two specific features to conceal the origins of criminally derived money – “Whirlpool” and “Ricochet.”

Whirlpool mixes batches of cryptocurrency transactions to obscure their traceability on the blockchain, while Ricochet adds unnecessary intermediate transactions to complicate the tracking process further.

Since their inception, these services have processed over 80,000 BTC, valued at more than $2 billion, earning the operators millions in fees.

Damian Williams, the United States Attorney for the Southern District of New York, announced the arrests.

Explicit Intent to Aid Criminal Activities

Evidence suggests that Rodriguez and Hill were fully aware of the criminal utilization of their service.

Their promotional activities on platforms like Twitter not only encouraged but openly invited criminals to use Samourai for money laundering purposes.

Invited criminals to use Samourai for money laundering purposes.
Invited criminals to use Samourai for money laundering purposes.

For instance, a tweet from Samourai’s account in June 2022 welcomed Russian oligarchs to use the wallet to circumvent sanctions.

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Further, the founders’ private communications and marketing materials revealed that they targeted “Dark/Grey Market participants” and acknowledged the illicit nature of their customer base.

samurai marketing materials – seeking to “swap their bitcoins with multiple parties” to avoid detection

These materials promoted Samourai as a “Premium Privacy Service” designed explicitly for transactions involving criminal proceeds.

The arrest of Rodriguez and Hill marks a pivotal moment in the ongoing battle against cryptocurrency-related crimes.

It underscores the challenges law enforcement faces in tracing the proceeds of criminal activities in the digital age.

The case also highlights the potential misuse of privacy-enhancing technologies in the cryptocurrency sector, prompting a reevaluation of regulatory and enforcement strategies to address these emerging threats.

As the legal proceedings unfold, the cryptocurrency community and regulatory bodies will be watching closely to see how this case influences future policies and practices in the industry.

The outcome could set a precedent for how similar services are treated under U.S. and international law, potentially leading to stricter regulations and oversight of privacy-focused cryptocurrency services.

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Divya is a Senior Journalist at Cyber Security news covering Cyber Attacks, Threats, Breaches, Vulnerabilities and other happenings in the cyber world.