Crypto-related prosecutions illustrate how allegations of crime are used to target privacy-enhancing tools and the people who build them.

At the Bitcoin conference in Nashville in July of 2024, then-candidate Donald Trump made a campaign promise to end the war against the use and development of cryptocurrencies. This war was coined “Operation Chokepoint 2.0” and led by Senator Elizabeth Warren, former Chair of the Securities and Exchange Commission Gary Gensler, and the Biden Administration. Despite Trump’s obvious relatively relaxed stance on “crypto”, the Biden-era “Chokepoint 2.0” lingers on: the CEO of Bitcoin “mixer” Samourai Wallet sentenced to five years in prison by the Southern District of New York on November 6. (So-called “mixers” allow users of cryptocurrencies to obtain a level of privacy not normally possible on public blockchains).

While the charge that ultimately stuck against Samourai Wallet CEO Keonne Rodriguez was conspiracy to operate an unlicensed money-transmitting business, repeated accusations of money laundering were used to build the case against him.

In a similar case in August 2024, a jury found Ethereum developer Roman Storm guilty of operating an unlicensed money transmitting business. In this case also, Storm was also charged with conspiracy to commit money laundering, because the privacy tool that he developed was alleged to have been used by nefarious actors. In the end, the jury’s lack of unanimous agreement meant the money laundering charge did not stick.

In the respective cases against both Rodriguez and Storm, prosecutors decided that money laundering (or conspiracy to launder) was a charge worth stacking against them to make the overall activities they were involved with appear to be of greater severity. And in both cases again, the charge that they were ultimately found guilty of (unlicensed money transmitting) doesn’t pass any reasonable smell test given that both Samourai Wallet and Tornado Cash were “non-custodial.” Neither service ever took custody of the coins to begin with, so they could not have “transmitted” funds, legally or otherwise. This was also the conclusion of lawyers at the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

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