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U.S. DOJ Cracks Down on Samourai Wallet for Alleged Money Laundering

Samourai Wallet developers released a beta version in 2024 allowing atomic swaps of bitcoin/monero. This new feature streamlined secure swaps between BTC and XMR using the Tor network. This release came amidst government scrutiny of privacy coins and exchanges delisting them. 

In October, FinCEN proposed new rules for crypto-mixing services. This was done to reduce money laundering risks. Also, starting from 30 Jan 2024, U.S. users would need to keep records. Following the beta version release, Samourai Wallet, Strike, and other firms urged FinCEN to drop its crypto-mixing rules proposal.

They argued the rules were too broad, interfered with lawful activities, and added unnecessary burdens to the industry. The companies also believed the data FinCEN wanted was already public. Hence, additional reporting was not necessary.

Read more: FinCEN Cracks Down on Bitzlato, Binance Named as CounterParty

Samourai Wallet Founders Arrested for Money Laundering

Keonne Rodriguez and William Lonergan Hill, founders of Samourai Wallet, were arrested and charged with money laundering and operating an unlicensed money transmitting business. The U.S. Department of Justice (DOJ), Southern District of New York, led the investigation. The charges claim that they enabled over $2 billion in illegal transactions and laundered over $100 million. 

The DOJ says Samourai Wallet mainly processed transactions from illegal dark web markets and defrauded decentralized finance protocols. Additionally, IRS-CI Special Agent Thomas Fattorusso noted that the major money laundering is due to the company’s lack of compliance.

Enforcement Agencies Seize Samourai Assets and Pursue Extradition

Law enforcement agencies coordinated their efforts to arrest Rodriguez in Pennsylvania and Hill in Portugal. The U.S. plans to seek Hill’s extradition for trial. Alongside the arrests, authorities collaborated with Icelandic officials to seize Samourai’s web servers and domain.

A seizure warrant was also issued for the Samourai Wallet mobile application on the Google Play Store, ensuring its removal from the U.S. market. U.S. Attorney Damian Williams emphasized the company’s role in facilitating money laundering from platforms like Silk Road and Hydra Market. He promised continued efforts to dismantle criminal organizations using cryptocurrency for illicit activities. 

Crypto Market Reacts to Samourai Wallet Founders’ Arrest

The cryptocurrency market became unstable after the U.S. DOJ arrested Samourai Wallet’s CEO and CTO. Within an hour of the news, Bitcoin fell by 3.6% to $64,296, while Ethereum dropped 2.51% to $3,147. Both coins recovered slightly afterward.

Read more: Ethereum Sees Decline In Whale Interest Amid Rising Bearish Threats: What’s Next For ETH Price?

Other popular coins like PEPE, Shiba Inu, and Dogecoin also fell. Bitcoin saw $33.08 million and Ethereum $29.88 million of long positions sold off. This drop came during Middle East tensions and after the recent Bitcoin halving.

People in the crypto world worry the arrests mean tougher rules from the U.S. government. Some think it’s a bad sign for Bitcoin.

SOURCE

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