DOJ Arrests Founders Of Popular Crypto Mixer

On Wednesday, the U.S. Department of Justice (DoJ) disclosed the arrest of Keonne Rodriguez, 35, and William Lonergan Hill, 65, the co-founders of a cryptocurrency mixer service called Samourai. The authorities have accused the service of facilitating more than $2 billion in illegal transactions and laundering over $100 million in criminal proceeds. Both Rodriguez and Hill have been charged with conspiracy to commit money laundering and operating an unlicensed money transmitting business, charges that carry a maximum sentence of 25 years in prison each.

The DoJ alleges that Rodriguez, serving as CEO, and Hill, the CTO, intentionally crafted Samourai to assist criminals in conducting extensive money laundering and sanctions evasion, while ostensibly operating as a privacy-centric service. This operation supposedly involved the laundering of funds derived from illicit dark web marketplaces such as Silk Road and Hydra, as well as from various spear-phishing schemes and scams targeting multiple decentralized finance protocols.

The investigation and subsequent operation involved multiple international law enforcement agencies, including those from Iceland and Portugal, along with Europol. This collaborative effort led to the seizure of Samourai's digital infrastructure and the removal of its Android application from the Google Play Store in the U.S. Hill was arrested in Portugal and is pending extradition to the U.S., while Rodriguez was apprehended in Pennsylvania.

Samourai offered a feature called Whirlpool, a cryptocurrency mixing service that purportedly helps users obscure the transaction trail of cryptocurrencies. This service was promoted as a tool to "mathematically disassociate the ownership of inputs to outputs in a given bitcoin transaction," which was claimed to enhance user privacy, protect against financial surveillance, and increase the fungibility of the Bitcoin network.

Additionally, Samourai incorporated a unique transaction type known as Ricochet Send, which adds intermediate steps to a cryptocurrency transfer, purportedly to defend against Bitcoin blacklists. This feature aimed to hinder the ability of law enforcement and cryptocurrency exchanges to trace if cryptocurrencies were derived from illegal activities. According to Samourai's official documentation, Ricochet was particularly recommended for transactions to entities known for closing accounts for questionable reasons, thereby providing an additional layer of obfuscation.

The DoJ also highlighted that the defendants marketed Samourai to specific user groups through social media platforms, such as X (formerly Twitter), openly inviting users like Russian oligarchs to use their service to circumvent sanctions and launder money. Furthermore, promotional materials intended for investors indicated that Samourai’s user base was expected to include online gamblers and criminals who required anonymity for their illicit operations. According to the DoJ, Rodriguez and Hill acknowledged that their revenues would primarily come from “Dark/Grey Market participants” who seek to “swap their bitcoins with multiple parties” to evade detection.

These arrests are part of a larger narrative concerning the security risks and regulatory challenges posed by decentralized cryptocurrency platforms. Just weeks prior to these arrests, a former security engineer named Shakeeb Ahmed was sentenced to three years in prison for hacking two decentralized cryptocurrency exchanges in July 2022 and stealing over $12.3 million, which he subsequently laundered using Samourai Whirlpool.

This case underscores the complex landscape of digital finance where the innovation and privacy benefits of cryptocurrencies are frequently exploited by criminal elements, presenting ongoing challenges for law enforcement and regulatory bodies globally. As the digital currency ecosystem continues to evolve, so too does the need for robust regulatory frameworks to mitigate the risks associated with its use for illicit activities.