.png)
The War on Privacy Continues
Tornado Cash
On April 26, the Department of Justice (DOJ) filed its opposition to Roman Storm’s pretrial motions to dismiss charges related to the operation of Tornado Cash and to suppress certain evidence. In its opposition, the DOJ asserted that dismissal of the indictment was unwarranted and asserted that the indictment was legally sufficient to proceed to trial. The DOJ rejected Storm’s First Amendment and Due Process claims, contending that the criminal statutes in this case do not infringe on Storm’s protected speech and that these statutes are clear and provide adequate notice of prohibited conduct.
Most importantly, the DOJ dedicated a section of its brief, “Section 1960 Does Not Require the Business to Have Control of the Funds,” to the novel argument that the criminal code section pertaining to unlawful operation of an unlicensed money transmitting business is broader than the definitions in the Bank Secrecy Act and 2019 FinCEN Guidance and does not require the defendant to have “control” over funds being transferred. Despite the consistent reliance on 2019 FinCEN guidance as the most instructive government-issued guidance on what constitutes a money services business, the DOJ distances itself from that guidance and instead takes an unprecedented view that “money transmission” includes every time the Tornado Cash “service” “conveyed cryptocurrency or caused cryptocurrency to pass from one place to another on the Ethereum blockchain every time a customer requested a deposit or withdrawal.”
The DOJ also opposed Storm’s request for the diplomatic communications between the US and other countries, as well as Storm’s motion to suppress evidence obtained from the seizure of cryptocurrency from his residence.
Samourai Wallet
On April 24, the founders of Samourai Wallet — an un-hosted bitcoin wallet — Keonne Rodriguez and William Lonergan Hill were arrested and charged with money laundering and operating an unlicensed money transmitting business. Specifically, the DOJ alleges that Rodriguez and Hill were knowingly laundering criminal proceeds through Samourai’s Whirlpool and Ricochet products and that they failed to implement know your customer (KYC) and anti-money laundering (AML) programs into Samourai products. The DOJ alleges that by running a centralized server the defendants exercised some form of “control” over “Samourai” as an amorphous term.
What does it mean?
The DOJ is continuing its full fledged assault on privacy-enhancing technology by completely disregarding technological realities and established money transmission laws. In each case, the DOJ fails to grapple with the concepts of self-custody and control of user funds. The Financial Crimes Enforcement Network (FinCEN) has long taken the view that the “production and distribution of software” itself does not constitute money transmission, and that “total independent control” over third party funds is necessary for someone to be a money transmitter. Nevertheless, the DOJ is aggressively moving forward with these charges on behalf of the U.S. notwithstanding other government agency’s directly relevant and contradictory guidance.
Another Crypto Letter from Senator Warren
What Happened?
On April 28, Senators Elizabeth Warren (D-MA) and Roger Marshall (R-KS) sent a letter to the U.S. Department of Defense, U.S. Department of the Treasury, the Financial Crimes Enforcement Network, and the White House about their “heightened concerns” over “rogue nations’—including Russia, Iran, and North Korea— “reliance on cryptocurrency to evade sanctions.” In the letter, Senators Warren and Marshall repeated their calls on Congress to grant additional powers to agencies to “neutralize” the threat posed by these nations' use of cryptocurrencies.
In discussing the need for additional powers, the letter also referenced both Deputy Secretary of the Treasury Wally Adeyemo’s April 2024 testimony before the Senate Committee on Banking, Housing, and Urban Affairs, as well as Treasury’s letter to Congress in November 2023 that asked for sweeping illicit finance authorities.
What does it mean?
The letter should come as no surprise for those who have followed the actions of Senator Warren over the past several years. The letter further evidences misunderstandings over the role that crypto plays in sanctions evasion and illicit finance, which undermines effective legislative responses to combat the illicit use of crypto.
