Ungovernable Misfits Presents: #FreeSamourai, a Work by damm kewl (@dammkewl). Read by Jon (@prevhashnonce). Edited by Jon and Max (@maxbitbuybit).
#FreeSamourai
Samourai Wallet's founders were arrested, indicted, and charged despite following the law. It seems the US government is starting another campaign against privacy, which we cannot allow to remain unopposed.
WHAT YOU CAN DO TO HELP
Donate to the Samourai Wallet defense fund: http://p2prights.org/?ref=blog.ronindojo.io. Fill in the form to make a tax-deductible donation or leave the information as N/A to make an anonymous donation. Put the following as the "purpose" of the donation (bottom form field):
Stay Informed: Follow updates on the case and learn more about the broader implications for the Bitcoin community.
Additional Links
#FreeSamourai
Samourai Wallet's founders were arrested, indicted, and charged despite following the law. It seems the US government is starting another campaign against privacy, which we cannot allow to remain unopposed.WHAT YOU CAN DO TO HELP
Donate to the Samourai Wallet defense fund: http://p2prights.org/?ref=blog.ronindojo.io. Fill in the form to make a tax-deductible donation or leave the information as N/A to make an anonymous donation. Put the following as the "purpose" of the donation (bottom form field):
U.S. v. Rodriguez & Hill (Samourai Wallet)Print the leaflet we made. It briefly explains the situation and has a QR code to this page. Share them wherever you think best helps the cause (for example: at bitcoin conferences):
- English: https://ronindojo.io/downloads/free-samourai-leaflet.pdf
- Español: https://ronindojo.io/downloads/free-samourai-leaflet-es.pdf
Stay Informed: Follow updates on the case and learn more about the broader implications for the Bitcoin community.
Additional Links
- https://blog.ronindojo.io/samourai-defense-fund/
- https://blog.ronindojo.io/always-rise-after-a-fall/
- https://freesamourai.com/
- https://www.youtube.com/watch?v=4j2IWfsCoMs
- https://mises.org/mises-wire/arrest-samourai-wallet-developers-shows-us-government-hates-privacy-and-freedom
- https://www.cato.org/blog/samourai-charges-mark-chilling-moment-financial-privacy-0
(00:03:57) Indictment & FinCEN guidelines
(00:17:36) Analogy: Explaining Whirlpool
(00:22:55) Previous Precedents on What Doesn't Constitute as Money Laundering
(00:25:32) The US Government's Strategic Campaign Against Privacy
(00:32:58) The Impact on Bitcoin
[00:00:04]
Unknown:
Bitcoin is close to becoming worthless. Now what's the Bitcoin?
[00:00:19] Unknown:
Bitcoin's like rat poison. Yeah.
[00:00:22] Unknown:
Oh. The greatest scam in history. Let's get it. Bitcoin will go to fucking 0. Yeah. Alright, you ungovernable misfits. I'm your host, Max. Everybody knows that Bitcoin is useless, worthless and doomed to fail. But what if everyone's wrong? What if it's the system that is doomed to fail? Join me as I speak to some of the brightest people in the space and slither to the deepest, darkest depths of the Bitcoin rabbit hole. Welcome back. I'm not gonna do a long intro. I'm tired, and this is all self explanatory stuff. I just wanna say a big thank you to Dan Cool for writing this article, and to John for stepping up to narrate it for dyslexic fucks like me who don't like to read.
This runs about 30, 35 minutes, but it is well worth listening to. It's an incredible article, and it gives you all the updates and info that you need on the samurai wallet case. I hope you enjoy it and if you have any questions at all, you can reach out to me, Dan Cool, or John for any info on how to support the cause.
[00:02:00] Unknown:
Hashtag free samurai by damn cool. Samurai Wallet's founders were arrested, indicted, and charged despite following the letter of the law. It seems the US government is starting another campaign against privacy, which we cannot afford to remain unopposed. Samurai Wallet From the start, Samurai Wallet have been transparent about their services. They provided their code fully open sourced and explained every public service they ran. All this was done in public for everyone to see as they, ironically enough, had nothing to hide. As will be detailed below, they followed the law to the letter as was laid out in government legislation and guidelines.
The key point was that Samurai Wallet's code allowed users to make transactions as they saw fit, without ever holding so much as a single set of the users in their own possession. Arrest and Seizure Despite following the law, the IRS Criminal Investigation Division and FBI have indicted the founders of Samurai Wallet and charged them with one count of conspiracy to commit money laundering and 1 count of conspiracy to operate an unlicensed money transmitting business. So on April 24, 2024 several of their servers and domain names were seized including samariwallet.com and code.samurai.
Io and the founders, Samurai Wallet, Wallet Guy, and T Dev were arrested. Whirlpool has become inactive as a result and anyone's wallet not connected to a self hosted Dojo Server will no longer be able to receive updates on the state of the user's incomingoutgoing Bitcoin transactions. Several ancillary websites have gone down as well, such as KYCP and OXT, probably the best free services to date that gave users the ability to research the privacy of their own transactions. Finally, sometime after the arrest, the wallet has been taken down from the Google Play Store at the request of the government. Indictment and FinCEN Guidelines.
SAMURAI Wallet have not acted as a money service business according to the government's own explanation of their laws. Given the 2019 FinCEN guidance issued to synthesize regulatory framework for virtual currency, the quote is as follows: By contrast, owners of unhosted wallets computer software that allow the owners to store and conduct CVC, convertible virtual currencies. Transactions are not money transmitters. Within the context of the legislation and the government's published interpretation of that, SAMURAI Wallet is exactly that, computer software that allows owners to store and conduct CVC transactions. At no point does Samurais Wallet receive Bitcoin that the user intends to have processed by the service for its intended purpose.
Thus, they are not money transmitters. The 2019 FinCEN guidelines continue on this matter as follows. Multiple signature wallet providers may be money transmitter depending on the services they offer. For example, if the multiple signature wallet provider limits its role to creating unhosted wallets that require the addition of a second authorization key to the wallet owner's private key in order to validate and complete transactions the wallet provider is not a money transmitter because it does not accept and transmit value Samurai Wallet is not a multiple signature wallet so this does not directly apply to Samurai Wallet. But, this does help in pointing out how samurai wallet is not a money transmitter It indicates that even entities involved in allowing a user access to their Bitcoin to the point of holding a secondary authorization key are still not to be considered a money transmitter if the service entails the user having his own unhosted wallet and the user not having to share their own private key with the service This hammers the point down to the essence The user has a self hosted wallet and not an account in a 3rd party service.
The service never has the private key under any circumstance. So no custody over the Bitcoin. With these facts your service is not a money transmitter. As part of the indictment, the prosecutor refers to Samurai Wallet receiving a payment for their services, but according to the 2019 FinCEN guidelines there is no such criteria relevant for the classification of being a money transmitter. Whether a CVC wallet provider is a money transmitter depends on 4 factors: a. Who owns the value? B. Where the value is stored? C. Whether the owner interacts directly with the payment system where the CVC runs and d.
Whether the person acting as an intermediary has total independent control over the value. In conclusion, what FinCEN laid out should be the interpretation of the law. There is no argument possible that the label of money transmitter applies to Samurai Wallet's services. In spite of this, the prosecutor claims that samurai wallet have acted as a money transmitter in their indictment. There is also a clear reason they want to label Samurai Wallet as a money transmitter. Without that claim, they have no basis for the charges. Samurai Wallet not being a money transmitter makes them unbeholden to the existing set of regulations.
Yet, the yet the US government likely repines lacking that legal position, as these ridiculous charges are their attempt to set a precedent, further explained below, which for them would be the next best thing. There are other egregiously false claims in the indictment. One such example is as follows: 23. The defendants owned, controlled, managed, and supervised samurai, which was engaged in the business of transferring funds on behalf of the public. As will be detailed with analogies further on in this article, samurai wallet have not at any point in the past transferred Bitcoin on behalf of the public Samurai Wallet has never held a single private key from any user.
Samurai Wallet has never taken custody of any Bitcoin. Samurai wallet has never handled transactions in any way that a bitcoin node doesn't do already. This last point is also key in the fact that this trial has a massive impact on Bitcoin and its users, to be further explained below. The charges. Note that all two charges in the indictment are conspiracy charges. There are no charges of money laundering and no charges of operating an unlicensed money transmitting business. This already warrants pointing out a few key things. 1st, given that Samurai Wallet publicly announced their software and services from the beginning, there is no barrier between any supposed conspiracy and a corresponding action in their situation.
They did not conspire to do any crimes given that they simply made the software as they publicly stated. In other situations, legal scholars will point out, you do not need to commit a crime to be charged for conspiracy of it. This is an irrelevant point to the situation, as Samurai Wallet publicly did what they publicly said they would do, and afterwards publicly explained what they did. They were consistent with every new software release they made and released it on the Internet in public. It poses the question, Where are the charges for any action instead of just the conspiracies?
Where is the charge to commit money laundering and the charge to operate an unlicensed money transmitting business? If what they said they would do was also subsequently done, the U. S. Government labeling the former as a conspiracy for committing a crime should logically have the same label as the latter crime that was conspired. But the government has curiously done nothing of the sort. To speculate briefly, it's easier to charge for conspiracy of an action than to charge for the specific action itself. The implication here is that the government knows they cannot charge samurai wallet as such. Thus for the government to have their way for ulterior motives, they apply lawfare in the manner with which they're most certain to cause damage.
2nd, no third parties pointed out as the owners of the illegal funds that they claim went through Whirlpool have been charged with money laundering by using Whirlpool. Thus, any reference to these third parties and their Bitcoin are an attempt by the government to give weight to their claims of conspiracy to money launder. While the government has yet to show these 3rd parties even so much as a fraction of the same litigious intent to go after as well. 3rd, before something can be labeled a criminal conspiracy it has to meet certain criteria. A criminal conspiracy exists when 2 or more people agree to commit a criminal offense and take a concrete step towards its completion.
The conduct need not itself be a crime, but it must indicate that those involved in the conspiracy knew of the plan and intended to break the law. Given that samurai have shown they hope to achieve many of the privacy standards that have existed in the fiat system, their intent was clear in bringing privacy to users that was already normal for the average Joe with a bank account normal before the existence of Bitcoin, but it wasn't just their articles that showed their intent. They designed their services exactly as such, in that it always gave their user full control of their own Bitcoin, never being an intermediary for the transfer of Bitcoin, merely helping users retain privacy when they themselves construct their own transactions using nothing but free and open source code under the supposed protection of the First Amendment.
Analogy Ricochet To continue using analogies and explaining these technologies, we'll use the example of you having some product you don't want to use anymore. Maybe you're done using your bike and you want to sell it to some other individual for let's say a bank transfer. In that scenario, this money for bike transaction has no further history related to it. Nothing about any previous activity from the bike purchaser is tied to this transaction. Your bank won't apply any history related scrutiny slash research to these funds. After all, you just sold a bike, nothing else happened between the 2 of you, nor will your bank investigate what future recipients of your funds will do with that money. It is of no concern to the bank what the supermarket does with your payment when you buy groceries.
Some Bitcoin slash crypto exchanges however believe that they do need to perform an invasive research on the history and future use of your Bitcoin. They dive sometimes as far as 4, maybe 5 transactions further down the line of the chain of transactions. It sounds like a small number. But as is generally the case with such exponential based numbers, it takes explaining why this number has such a high impact. If the bike purchaser paid you in Bitcoin, you have no control of how he used the Bitcoin before sending some to you. It may be he reused addresses for example. That means that at any previous transaction he has ever made may be considered tied together by the exchange The same could be the case for anyone, or even everyone who gave some Bitcoin to the bike purchaser, and the same before that, and so forth.
Before the exchange allows you access to the Bitcoin you've just sent to them, they may end up first looking at thousands of people's transaction history, if not more, just so they can feel safe to handle your Bitcoin, and that's regardless of how large or small an amount of Bitcoin you send to the exchange. Remember that with any bank transfer to an exchange that number is nowhere near 1,000, it's 0! To apply these rules only to Bitcoin and crypto, but not the traditional fiat system, this privacy detriment makes no sense as they judge how to handle your Bitcoin based off how others outside of your control have handled their Bitcoin before you. It is in fact even worse than that.
Given that an address re user may very well do something stupid at a future point in time with their Bitcoin well after he's given you some Bitcoin. The exchange would then look at the reused addresses from which your Bitcoin came, and label that address as a risk and thus retroactively impact your Bitcoin by denying you access to it. Thus, Ricochet does a very simple thing to bring using Bitcoin back to the realm of sanity. Ricochet creates a hop to have your Bitcoin sent from yourself to yourself it puts in a new address as a result in fact it does this 6 times in a row This is very obvious on chain, there is in fact no real privacy gained here.
If you receive a ricochet payment from somebody, you can check it out on a block explorer and see 6 transactions in a row where the bitcoin are simply passed onward. Past those 6 transactions, you can see the same history that you would otherwise see if they did a simple payment instead of a ricochet. Gaining privacy isn't the goal of ricochet, it's to achieve sanity when interacting with an exchange where with your ricochet transaction, you implicitly tell the exchange. Hey! This is my bitcoin, there is no justifiable basis for you to look any further into this, as I have no further association with those people that I have received the Bitcoin from.
You could however look at the transaction further into its history, and it's very obvious on chain and simple to do so, but you'll look very silly doing so, knowing that I had nothing to do with those transactions. The only reason Ricochet is designed this way is because exchanges have automated this invasive research. There's not an actual person behind some computer putting on their reading glasses and going through Bitcoin transactions. There is not a human with a sense of duty or due diligence who's the one passing judgment on your transactions. Their systems are fully automated and set up with risk score calculations, of which their efficacy has yet to be proven, but also of which the relevance has yet to be explained.
There's no transparency by these exchanges on what constitutes a problematic transaction, other than vague abstract assertions. That means you yourself can't even do the research on the history of your Bitcoin to assess whether an exchange would take your Bitcoin and basically run away with it under the claim of complying with regulations note there is zero legal obligation by users to send Bitcoin in a way that they would be maximally linked to any obscure history far removed from what they again have no control of researching themselves in the first place. It would be absurd to even expect such a thing even more so in the face of the United States having what's most important here the 5th amendment stating the right to not self incriminate the US government thus cannot enforce regulations upon the customer of services only upon the services themselves within the confines of their legislation.
To draw a short comparison, when registering to purchase a firearm in the US, you have to fill in ATF form 4473. It is not illegal for anyone to write an article online that says, if you fill in X at question Y you will be denied access if you fill in Z at question Y you won't be denied access such an article would be an explanatory statement of fact it would be protected under the first amendment and it cannot be construed as conspiracy to make people lie on a form. Otherwise, the law's wording itself would have to be held up to the same standard, as the law 2 is an article that tells you under what conditions you are denied access, and neither copying nor describing the law or regulations can be considered a crime. In the same manner because samurai wallet is an unhosted wallet, the code they publish merely tells people in which ways you can make a transaction, but it is the user who decides in which specific way the wallet is to make a transaction, and send that transaction out into the world for the Bitcoin network to accept analogy explaining Whirlpool their Whirlpool service provided users a way to delink their past receives from future spends.
This is a very basic concept that even the average Joe enjoys when using his bank. Your employer does not know where, when, how you spend your wages. It takes delinking on Bitcoin as such before the same is achieved there. Samurai wallet has achieved this with Whirlpool. The analogy can be made that 5 people have each a $20 bill. For comparison sake, imagine this dollar bill somehow shows the history of all previous transactions that can be related to. It's a fancy e ink bill where you can scroll through its history, and it shows this history all the way back to the bill's original issuance in Bitcoin, the mine block that created it. A person named Samurai Wallet holds out his hand with a large top hat and says you can use this hat to transact with each other, but you can only each hold a $20 bill in it. The 5 people then each put their hand holding a $20 bill into the hat. After this has been done, samurai wallet then says, it seems everybody has agreed to this transaction.
Lastly, the 5 participants then each take their hand out again, holding a $20 bill. Each $20 bill now shows this new transaction $20 bill now shows the new transaction. It also shows the $20 bill now shows the new transaction. It also shows the full history of all transactions that have preceded this particular transaction. That includes the history of the other 4 bills. You cannot pick 1 of the $20 bills and see the person who owns its specific transaction history. On top of that each participant puts on a mask before putting their hand in the hat, then while looking away changes to a completely new mask before taking out their money. This is the blinding in the chowman coin joint technology this way no onlooker not even samurai wallet can take how a bills transaction history looked before this event and look at who was holding it, and then tie that to the same person holding the updated bill.
In short, afterwards, neither the $20 bill nor the masked person holding it can be tied to anything from before the transaction. Not any of the first set of 5 masks nor any of the first separate 5 sets of $20 bills transaction histories. Samurai wallet at no point take any action themselves in hiding the user's identity for them. Their coordinator merely only accepts the data in blinded form. In other words, participants are only allowed to join the transaction if they agree to wearing a mask before participating, and agree to change masks before removing their hand from the hat.
To reiterate on the transaction history aspect all transactions in Bitcoin behave the exact same way. This transaction in the hat does not produce an anomaly compared to any other transaction. In Bitcoin's transaction data structures, it is not the case that the other transactions have a clear distinction from these coin joined transactions. It is not the case that usually inside a non coin joined transaction, a set of its inputs are clearly tied to a subset of its outputs. Each transaction adds the full history of all inputs for the transaction, and each transaction simply has only the full set of all new outputs it created, with no additional distinguishing properties in there.
For all intents and purposes, Bitcoin considers these coin joined transactions normal, as there is nothing different in there to consider it different from other transactions. Samurai Wallet and all other coin join implementations haven't actually introduced something new to the transaction data construct here. They haven't introduced defying ownership visibility what samurai wallet have done is hold up a hat and said only $20 bills are allowed in here with this no distinction can be made between any particular participants amount of Bitcoin in this transaction There is no one person put more in the hat than the others, which would make their Bitcoin going in and coming out correlate 100%.
And they did this without taking control of the Bitcoin as the participants held on to their $20 bill the whole time throughout the transaction. If at any point, samurai wallet backed out the process, all samurai wallet could do was take that and leave before the transaction was made, and all participants would still be holding on to their $20 bill each. Imagine the post office mailing cash, which not only happens already, several Post Offices have explicitly stated there is no legal problem with this. The Post Office, however, despite physically having the funds in their possession, has no regulations it must follow on this matter.
It is not required to perform KYC AML. It does not have to x-ray scan to find any cash or checks in their packages. Despite all of this, and openly inviting the public to use their services for it, not one post office is charged with conspiracy to commit money launderingacting as an unlicensed money transmitter. Previous precedents on what doesn't constitute as money laundering There's relevant precedent in the history of the US law regarding what constitute as money laundering. One such outcome of a case states that the government is required to prove the money was portrayed by the defendant as legitimate wealth before he could be charged with money laundering. This scenario was not directly relevant given that unlike this older case, samurai wallet was never in possession of Bitcoin that users sent through Whirlpool.
But in relation to the charges being conspiracy charges specifically, at no point did samurai wallet make any such legitimacy claims about Bitcoin that would go through Whirlpool. It's even more clear that the terms used in the statute conceal disguise did not apply to ricochet As Samurai Wallet have explained, a ricochet spend is very clear on chain, and does not provide privacy. Prosecution claiming otherwise in paragraph 27 in the indictment. The statement by the Supreme Court on this case from 2007 affirms that, it was not proven the defendant knew the purpose of his action was to conceal, or disguise the illicit nature of the money he had in his possession. This distinction makes it clear that it was irrelevant whether the defendant knew the effect would be said illicit nature would become concealed, disguised.
This matters in the case of Samurai Wallet given precisely the allegations made by the prosecutor. As the prosecutor claims samurai wallet performs zero check on who brings their Bitcoin to Whirlpool that means by default that samurai wallet have no information about any possible illicit nature behind the source of any Bitcoin. Given this fact, no purpose for using Whirlpool can be inferred by Samura wallet from any of the incoming Bitcoin. Another case was vacated despite the defendant pleading guilty for the reason that the profits were not used in the illegal activity. The term proceeds was initially interpreted by the court to imply all revenue of the illegal activity, which if held up would mean all criminal enterprise by definition would also be money laundering.
To prevent this becoming the precedent and keep the law's interpretation clear for its purposes, the district court established money laundering to be specifically related to the profits of illegal activity affirmed by the 7th Circuit. At the very least, this means that the prosecution cannot claim what samurai wallet did with the revenue of Whirlpool for maintaining the business, I e paying for servers to be relevant for any alleged money laundering. Prosecution claiming otherwise in paragraph 11 in the indictment. The US government's strategic campaign against privacy.
We all know that once you enter the realm that is the court of law, prudence becomes most important. Samurai wallet, in fact, understood this before the US government had made any moves as they kept track of any legislative moves made by the US government in relation to their judgment on Bitcoin's transactional nature. So when FinCEN took it upon themselves to leap for criminalizing basic transactions even so much as labeling not reusing addresses as specific behavior, samurai wallet responded in kind with a well formed legal letter signed by themselves and other significant companies in the Bitcoin ecosphere in an attempt to stop the attack on privacy dead in its tracks.
See Samurais blog: Our response to FinCEN Proposed Rules for Bitcoin Mixing There's roughly 3 months that went by between Samurais Wallet's response to FinCEN's proposal and their arrest. While we can speculate on a link between the two, there are more important things to consider that have happened since, given how all of this impacts all of us. The FBI campaign to threaten cryptocurrency users that they must use registered money transmitters. One day after the arrest and asset seizure, the government releases an alert on cryptocurrency money services businesses.
Here, the FBI, as the enforcement arm of the DOJ, seems to imply that any cryptocurrency related service must follow the money transmitter regulations because otherwise they can expect the same judicial overreach that has been used on samurai wallet. This is a very disturbing and worrying statement so closely timed to their arrest, for obvious reasons. They have no control over those who aren't a money transmitter, so they try to force everybody's hand to become a registered money transmitter. The effects of this have become very real already, as several services have responded by exiting the U. S, shutting down, or worse implemented KYC.
Shutdown Local Monero and AgoraDesk. US Exit, Wasabi Wallet and Phoenix Wallet US Exit HODL HODL US Exit IBEX implemented KYC, Speed wallet, and with this we can see the chilling effect of judicial overreach before the samurai wallet trial has even begun. The US government's pet witness can make claims you cannot refute. About a month before the samurai wallet indictment, Roman Sterlingov was convicted by the US government of operating an unlicensed money transmitter in a most curious case. The government alleges he was the administrator of the Bitcoin Fog custodial tumbler with attribution to Sterlingov primarily coming from IP address and blockchain forensic data provided by Chainalysis as an expert witness.
For their part, Samurai Wallet and OXT aided in the defense's preparation for the Dawbert hearings on the validity and admissibility of the Chainalysis software and heuristics. During the hearings several issues with Chainalysis methodologies were disclosed by Chainalysis head of investigations including both lack of error rate tracking and peer review of the Chainalysis code base. Despite these issues the judge of the case ruled that Chainalysis Reactor was admissible using pseudoscience logic. Additionally, both OXT and CipherTrace Sterlingov's main expert witness and a direct competitor to Chainalysis were effectively barred from review of Chainalysis proprietary black box heuristics.
CipherTrace was set to testify against Chainalysis heuristics and application of blockchain forensics use in a primary attribution methodology in criminal prosecution. However, 1 week before trial, CipherTrace was pulled from the case by their wholly owned subsidiary MasterCard. This meant that black box software, heuristics, and forensic methodology went completely unchallenged during trial allowing the government to railroad Roman Sterling off and obtain their desired guilty verdict for a crime he did not commit. This affects all Bitcoin related legal cases from that point on until an appeal overturns the validity of this expert witness.
Whatever statement this unchecked third party makes on any activity on Bitcoin's blockchain is now admissible evidence in a trial case and as was demonstrated in Roman Sterlingoff's case, you are likely not allowed to provide an expert witness of your own on the same subject matter. You receive some Bitcoin, you spend it somewhere, and at some unknown point in the future you are charged and arrested. You may want to claim you had nothing to do with a transaction 2 hops back from where you receive some bitcoin, but in the face of this now newly established authority, your claims make no dent in whatever they may claim, with your life hanging in the balance. The US government doesn't stop at its borders.
Another case in the same theme was that of Tornado Cash. Alexey Pertsev was arrested February 15, 2023, initially without charges and later charged with money laundering, Netherlands law. Roman Sterlingoff and Roman Semenoff were indicted August 25, 2024. For conspiracy charges, US law, money laundering, operating unlicensed money transmitting business, violates sanctions. It seems the US government has found its hammer to hit every nail with by charging privacy coders with whichever category they can easily get conspiracy convictions for. What's probably the most important consequence thus far in the ruling of Alexey Pertsev, the statement made by the judge reading the conviction was a most chilling one. Because they did not put any barriers in their software to oppose criminals who would want to use it for laundering. The defendant was found guilty of money laundering.
While the Pertsev trial did not occur in the US, what is shown in all these cases is the impact of the collaboration between the Western jurisdictions, Portugal, Iceland, Europol, the US government. These have worked together in the samurai wallet indictment and arrest. In Alexei's case, also the Netherlands. Likely any EU member state can be considered a part of this litigious covenant. This is important to understand for citizens of every EU member state. Your nation state may have a much easier time charging you for money laundering than the US would charging US citizens. Pertev was not charged with conspiracy.
He was charged and convicted for money laundering. In the Netherlands, the judges are also jury. Its constitution is no barrier for new legislation, and there is no supreme court to appeal to. Semri Wallet hosted their servers in Iceland. This jurisdiction was precisely chosen for the reason that the data center there had a policy to not comply with foreign nation state legal requests. The Icelandic government itself would have to follow their own laws using proper procedure before any request such as an asset seizure could be enforced in the data center. Given that the indictment is from the US government, this makes it clear the Icelandic government acted at the instruction of the US government to perform the asset seizure and take down samurai wallet servers. The impact on Bitcoin.
So now we are in the situation where several months in a row one privacy coder is put out of commission after another using lawfare and unjust procedures as a weapon already. They silence those who would voice their criticism of the government's proposal to make unregulated behavior illegal. They stop those who build privacy solutions, and put them in prison. 2 senators have already voiced their disdain for the situation. Senator Lummis stated how this stance contradicts existing treasury guidance, common sense, and violates the rule of law. She sent a letter together with senator Wyden urging the Department of Justice to reconsider its enforcement action in the case of samurai wallet.
Other well connected individuals such as Caitlin Long are also starting to take notice. We must reiterate that non custodial mixers are not money transmitters. No new law has been passed yet that that changes this, but the samurai wallet trial may set precedent such as they needn't go through the trouble of an acting new law. Given that the prosecutor claims samurai wallet have transferred funds on behalf of the public where there is no evidence of the sort because samurai wallet never did this. This could open up many possible interpretations of Bitcoin used by the government, all to the detriment of Bitcoin users.
This impacts at the very least lightning node operators they to perform no k y c a m l on their nodes before accepting incoming Bitcoin and passing it on to the next node furthermore mining pools could be held liable for not performing KYC AML for their mining payouts and if we go beyond the parts of Bitcoin that handle funds directly, even if non custodially this terrible precedent could even establish that any service which could potentially be used for criminals to obfuscate criminal activity could be held liable for facilitating this. Bitcoin's node implementations and the wallets people use may become the next target pending the outcome of this trial, but at that point Pandora's box has already been opened to go after any software or service.
Imagine signal messenger being prosecuted for conspiracy, because some criminals used it for encrypted communication. This is not hyperbole in the slightest. The US already has a terrible track record towards respecting the privacy of its citizens, but more importantly, it was a hard fought battle for the precedence in US law about the first amendment protection of code. This situation is likely to impact Bitcoin for all US citizens and citizens of foreign nations, EU member states, where the US government extends their enforcement upon. Bitcoin has its own history in relation to the US legislation, where it depends on its constituents to fight for their own rights to the freedom to transact, and their freedom to do so privately.
One such moment in history to join the fight is right fucking now. What you can do to help? Donate to the samurai wallet defense fund, p2prights.org. That link will be in the show notes. Fill in the form to make a tax deductible donation, or leave the information as n a, to make an anonymous donation. Put the following as the purpose of the donation USV Rodriguez and Hill SAMRII Wallet Print the leaflet we made. It briefly explains the situation and has a QR code to this page. Share them wherever you think best helps the cause, for example, at Bitcoin conferences.
Links to the flyer in English and links to the flyer in Spanish will also be in the show notes. Spread the word. Share this blog post. Talk to your friends. Have the conversation on podcasts, and use your social media platforms to raise awareness about this critical issue. Links to this free samurai article on the Ronin Dojo blog by Damn Cool will also be in the show notes. Stay informed. Follow updates on the case and learn more about the broader implications for the Bitcoin community. Additional links to resources will also be in the show notes.
[00:37:08] Unknown:
Thanks for listening. I wanna say a huge thank you to Damkool for writing this incredible article, keeping everyone up to date, and also to John for taking the time to narrate this. It takes a long time to do these things, and he took this out of his weekend where he could be spending time with his wife and kids, but he wants to make sure that people understand how important it is that they support samurai wallet and protect our privacy. If you want more content like this, check us out at Ungovernable Misfits dot com.
Bitcoin is close to becoming worthless. Now what's the Bitcoin?
[00:00:19] Unknown:
Bitcoin's like rat poison. Yeah.
[00:00:22] Unknown:
Oh. The greatest scam in history. Let's get it. Bitcoin will go to fucking 0. Yeah. Alright, you ungovernable misfits. I'm your host, Max. Everybody knows that Bitcoin is useless, worthless and doomed to fail. But what if everyone's wrong? What if it's the system that is doomed to fail? Join me as I speak to some of the brightest people in the space and slither to the deepest, darkest depths of the Bitcoin rabbit hole. Welcome back. I'm not gonna do a long intro. I'm tired, and this is all self explanatory stuff. I just wanna say a big thank you to Dan Cool for writing this article, and to John for stepping up to narrate it for dyslexic fucks like me who don't like to read.
This runs about 30, 35 minutes, but it is well worth listening to. It's an incredible article, and it gives you all the updates and info that you need on the samurai wallet case. I hope you enjoy it and if you have any questions at all, you can reach out to me, Dan Cool, or John for any info on how to support the cause.
[00:02:00] Unknown:
Hashtag free samurai by damn cool. Samurai Wallet's founders were arrested, indicted, and charged despite following the letter of the law. It seems the US government is starting another campaign against privacy, which we cannot afford to remain unopposed. Samurai Wallet From the start, Samurai Wallet have been transparent about their services. They provided their code fully open sourced and explained every public service they ran. All this was done in public for everyone to see as they, ironically enough, had nothing to hide. As will be detailed below, they followed the law to the letter as was laid out in government legislation and guidelines.
The key point was that Samurai Wallet's code allowed users to make transactions as they saw fit, without ever holding so much as a single set of the users in their own possession. Arrest and Seizure Despite following the law, the IRS Criminal Investigation Division and FBI have indicted the founders of Samurai Wallet and charged them with one count of conspiracy to commit money laundering and 1 count of conspiracy to operate an unlicensed money transmitting business. So on April 24, 2024 several of their servers and domain names were seized including samariwallet.com and code.samurai.
Io and the founders, Samurai Wallet, Wallet Guy, and T Dev were arrested. Whirlpool has become inactive as a result and anyone's wallet not connected to a self hosted Dojo Server will no longer be able to receive updates on the state of the user's incomingoutgoing Bitcoin transactions. Several ancillary websites have gone down as well, such as KYCP and OXT, probably the best free services to date that gave users the ability to research the privacy of their own transactions. Finally, sometime after the arrest, the wallet has been taken down from the Google Play Store at the request of the government. Indictment and FinCEN Guidelines.
SAMURAI Wallet have not acted as a money service business according to the government's own explanation of their laws. Given the 2019 FinCEN guidance issued to synthesize regulatory framework for virtual currency, the quote is as follows: By contrast, owners of unhosted wallets computer software that allow the owners to store and conduct CVC, convertible virtual currencies. Transactions are not money transmitters. Within the context of the legislation and the government's published interpretation of that, SAMURAI Wallet is exactly that, computer software that allows owners to store and conduct CVC transactions. At no point does Samurais Wallet receive Bitcoin that the user intends to have processed by the service for its intended purpose.
Thus, they are not money transmitters. The 2019 FinCEN guidelines continue on this matter as follows. Multiple signature wallet providers may be money transmitter depending on the services they offer. For example, if the multiple signature wallet provider limits its role to creating unhosted wallets that require the addition of a second authorization key to the wallet owner's private key in order to validate and complete transactions the wallet provider is not a money transmitter because it does not accept and transmit value Samurai Wallet is not a multiple signature wallet so this does not directly apply to Samurai Wallet. But, this does help in pointing out how samurai wallet is not a money transmitter It indicates that even entities involved in allowing a user access to their Bitcoin to the point of holding a secondary authorization key are still not to be considered a money transmitter if the service entails the user having his own unhosted wallet and the user not having to share their own private key with the service This hammers the point down to the essence The user has a self hosted wallet and not an account in a 3rd party service.
The service never has the private key under any circumstance. So no custody over the Bitcoin. With these facts your service is not a money transmitter. As part of the indictment, the prosecutor refers to Samurai Wallet receiving a payment for their services, but according to the 2019 FinCEN guidelines there is no such criteria relevant for the classification of being a money transmitter. Whether a CVC wallet provider is a money transmitter depends on 4 factors: a. Who owns the value? B. Where the value is stored? C. Whether the owner interacts directly with the payment system where the CVC runs and d.
Whether the person acting as an intermediary has total independent control over the value. In conclusion, what FinCEN laid out should be the interpretation of the law. There is no argument possible that the label of money transmitter applies to Samurai Wallet's services. In spite of this, the prosecutor claims that samurai wallet have acted as a money transmitter in their indictment. There is also a clear reason they want to label Samurai Wallet as a money transmitter. Without that claim, they have no basis for the charges. Samurai Wallet not being a money transmitter makes them unbeholden to the existing set of regulations.
Yet, the yet the US government likely repines lacking that legal position, as these ridiculous charges are their attempt to set a precedent, further explained below, which for them would be the next best thing. There are other egregiously false claims in the indictment. One such example is as follows: 23. The defendants owned, controlled, managed, and supervised samurai, which was engaged in the business of transferring funds on behalf of the public. As will be detailed with analogies further on in this article, samurai wallet have not at any point in the past transferred Bitcoin on behalf of the public Samurai Wallet has never held a single private key from any user.
Samurai Wallet has never taken custody of any Bitcoin. Samurai wallet has never handled transactions in any way that a bitcoin node doesn't do already. This last point is also key in the fact that this trial has a massive impact on Bitcoin and its users, to be further explained below. The charges. Note that all two charges in the indictment are conspiracy charges. There are no charges of money laundering and no charges of operating an unlicensed money transmitting business. This already warrants pointing out a few key things. 1st, given that Samurai Wallet publicly announced their software and services from the beginning, there is no barrier between any supposed conspiracy and a corresponding action in their situation.
They did not conspire to do any crimes given that they simply made the software as they publicly stated. In other situations, legal scholars will point out, you do not need to commit a crime to be charged for conspiracy of it. This is an irrelevant point to the situation, as Samurai Wallet publicly did what they publicly said they would do, and afterwards publicly explained what they did. They were consistent with every new software release they made and released it on the Internet in public. It poses the question, Where are the charges for any action instead of just the conspiracies?
Where is the charge to commit money laundering and the charge to operate an unlicensed money transmitting business? If what they said they would do was also subsequently done, the U. S. Government labeling the former as a conspiracy for committing a crime should logically have the same label as the latter crime that was conspired. But the government has curiously done nothing of the sort. To speculate briefly, it's easier to charge for conspiracy of an action than to charge for the specific action itself. The implication here is that the government knows they cannot charge samurai wallet as such. Thus for the government to have their way for ulterior motives, they apply lawfare in the manner with which they're most certain to cause damage.
2nd, no third parties pointed out as the owners of the illegal funds that they claim went through Whirlpool have been charged with money laundering by using Whirlpool. Thus, any reference to these third parties and their Bitcoin are an attempt by the government to give weight to their claims of conspiracy to money launder. While the government has yet to show these 3rd parties even so much as a fraction of the same litigious intent to go after as well. 3rd, before something can be labeled a criminal conspiracy it has to meet certain criteria. A criminal conspiracy exists when 2 or more people agree to commit a criminal offense and take a concrete step towards its completion.
The conduct need not itself be a crime, but it must indicate that those involved in the conspiracy knew of the plan and intended to break the law. Given that samurai have shown they hope to achieve many of the privacy standards that have existed in the fiat system, their intent was clear in bringing privacy to users that was already normal for the average Joe with a bank account normal before the existence of Bitcoin, but it wasn't just their articles that showed their intent. They designed their services exactly as such, in that it always gave their user full control of their own Bitcoin, never being an intermediary for the transfer of Bitcoin, merely helping users retain privacy when they themselves construct their own transactions using nothing but free and open source code under the supposed protection of the First Amendment.
Analogy Ricochet To continue using analogies and explaining these technologies, we'll use the example of you having some product you don't want to use anymore. Maybe you're done using your bike and you want to sell it to some other individual for let's say a bank transfer. In that scenario, this money for bike transaction has no further history related to it. Nothing about any previous activity from the bike purchaser is tied to this transaction. Your bank won't apply any history related scrutiny slash research to these funds. After all, you just sold a bike, nothing else happened between the 2 of you, nor will your bank investigate what future recipients of your funds will do with that money. It is of no concern to the bank what the supermarket does with your payment when you buy groceries.
Some Bitcoin slash crypto exchanges however believe that they do need to perform an invasive research on the history and future use of your Bitcoin. They dive sometimes as far as 4, maybe 5 transactions further down the line of the chain of transactions. It sounds like a small number. But as is generally the case with such exponential based numbers, it takes explaining why this number has such a high impact. If the bike purchaser paid you in Bitcoin, you have no control of how he used the Bitcoin before sending some to you. It may be he reused addresses for example. That means that at any previous transaction he has ever made may be considered tied together by the exchange The same could be the case for anyone, or even everyone who gave some Bitcoin to the bike purchaser, and the same before that, and so forth.
Before the exchange allows you access to the Bitcoin you've just sent to them, they may end up first looking at thousands of people's transaction history, if not more, just so they can feel safe to handle your Bitcoin, and that's regardless of how large or small an amount of Bitcoin you send to the exchange. Remember that with any bank transfer to an exchange that number is nowhere near 1,000, it's 0! To apply these rules only to Bitcoin and crypto, but not the traditional fiat system, this privacy detriment makes no sense as they judge how to handle your Bitcoin based off how others outside of your control have handled their Bitcoin before you. It is in fact even worse than that.
Given that an address re user may very well do something stupid at a future point in time with their Bitcoin well after he's given you some Bitcoin. The exchange would then look at the reused addresses from which your Bitcoin came, and label that address as a risk and thus retroactively impact your Bitcoin by denying you access to it. Thus, Ricochet does a very simple thing to bring using Bitcoin back to the realm of sanity. Ricochet creates a hop to have your Bitcoin sent from yourself to yourself it puts in a new address as a result in fact it does this 6 times in a row This is very obvious on chain, there is in fact no real privacy gained here.
If you receive a ricochet payment from somebody, you can check it out on a block explorer and see 6 transactions in a row where the bitcoin are simply passed onward. Past those 6 transactions, you can see the same history that you would otherwise see if they did a simple payment instead of a ricochet. Gaining privacy isn't the goal of ricochet, it's to achieve sanity when interacting with an exchange where with your ricochet transaction, you implicitly tell the exchange. Hey! This is my bitcoin, there is no justifiable basis for you to look any further into this, as I have no further association with those people that I have received the Bitcoin from.
You could however look at the transaction further into its history, and it's very obvious on chain and simple to do so, but you'll look very silly doing so, knowing that I had nothing to do with those transactions. The only reason Ricochet is designed this way is because exchanges have automated this invasive research. There's not an actual person behind some computer putting on their reading glasses and going through Bitcoin transactions. There is not a human with a sense of duty or due diligence who's the one passing judgment on your transactions. Their systems are fully automated and set up with risk score calculations, of which their efficacy has yet to be proven, but also of which the relevance has yet to be explained.
There's no transparency by these exchanges on what constitutes a problematic transaction, other than vague abstract assertions. That means you yourself can't even do the research on the history of your Bitcoin to assess whether an exchange would take your Bitcoin and basically run away with it under the claim of complying with regulations note there is zero legal obligation by users to send Bitcoin in a way that they would be maximally linked to any obscure history far removed from what they again have no control of researching themselves in the first place. It would be absurd to even expect such a thing even more so in the face of the United States having what's most important here the 5th amendment stating the right to not self incriminate the US government thus cannot enforce regulations upon the customer of services only upon the services themselves within the confines of their legislation.
To draw a short comparison, when registering to purchase a firearm in the US, you have to fill in ATF form 4473. It is not illegal for anyone to write an article online that says, if you fill in X at question Y you will be denied access if you fill in Z at question Y you won't be denied access such an article would be an explanatory statement of fact it would be protected under the first amendment and it cannot be construed as conspiracy to make people lie on a form. Otherwise, the law's wording itself would have to be held up to the same standard, as the law 2 is an article that tells you under what conditions you are denied access, and neither copying nor describing the law or regulations can be considered a crime. In the same manner because samurai wallet is an unhosted wallet, the code they publish merely tells people in which ways you can make a transaction, but it is the user who decides in which specific way the wallet is to make a transaction, and send that transaction out into the world for the Bitcoin network to accept analogy explaining Whirlpool their Whirlpool service provided users a way to delink their past receives from future spends.
This is a very basic concept that even the average Joe enjoys when using his bank. Your employer does not know where, when, how you spend your wages. It takes delinking on Bitcoin as such before the same is achieved there. Samurai wallet has achieved this with Whirlpool. The analogy can be made that 5 people have each a $20 bill. For comparison sake, imagine this dollar bill somehow shows the history of all previous transactions that can be related to. It's a fancy e ink bill where you can scroll through its history, and it shows this history all the way back to the bill's original issuance in Bitcoin, the mine block that created it. A person named Samurai Wallet holds out his hand with a large top hat and says you can use this hat to transact with each other, but you can only each hold a $20 bill in it. The 5 people then each put their hand holding a $20 bill into the hat. After this has been done, samurai wallet then says, it seems everybody has agreed to this transaction.
Lastly, the 5 participants then each take their hand out again, holding a $20 bill. Each $20 bill now shows this new transaction $20 bill now shows the new transaction. It also shows the $20 bill now shows the new transaction. It also shows the full history of all transactions that have preceded this particular transaction. That includes the history of the other 4 bills. You cannot pick 1 of the $20 bills and see the person who owns its specific transaction history. On top of that each participant puts on a mask before putting their hand in the hat, then while looking away changes to a completely new mask before taking out their money. This is the blinding in the chowman coin joint technology this way no onlooker not even samurai wallet can take how a bills transaction history looked before this event and look at who was holding it, and then tie that to the same person holding the updated bill.
In short, afterwards, neither the $20 bill nor the masked person holding it can be tied to anything from before the transaction. Not any of the first set of 5 masks nor any of the first separate 5 sets of $20 bills transaction histories. Samurai wallet at no point take any action themselves in hiding the user's identity for them. Their coordinator merely only accepts the data in blinded form. In other words, participants are only allowed to join the transaction if they agree to wearing a mask before participating, and agree to change masks before removing their hand from the hat.
To reiterate on the transaction history aspect all transactions in Bitcoin behave the exact same way. This transaction in the hat does not produce an anomaly compared to any other transaction. In Bitcoin's transaction data structures, it is not the case that the other transactions have a clear distinction from these coin joined transactions. It is not the case that usually inside a non coin joined transaction, a set of its inputs are clearly tied to a subset of its outputs. Each transaction adds the full history of all inputs for the transaction, and each transaction simply has only the full set of all new outputs it created, with no additional distinguishing properties in there.
For all intents and purposes, Bitcoin considers these coin joined transactions normal, as there is nothing different in there to consider it different from other transactions. Samurai Wallet and all other coin join implementations haven't actually introduced something new to the transaction data construct here. They haven't introduced defying ownership visibility what samurai wallet have done is hold up a hat and said only $20 bills are allowed in here with this no distinction can be made between any particular participants amount of Bitcoin in this transaction There is no one person put more in the hat than the others, which would make their Bitcoin going in and coming out correlate 100%.
And they did this without taking control of the Bitcoin as the participants held on to their $20 bill the whole time throughout the transaction. If at any point, samurai wallet backed out the process, all samurai wallet could do was take that and leave before the transaction was made, and all participants would still be holding on to their $20 bill each. Imagine the post office mailing cash, which not only happens already, several Post Offices have explicitly stated there is no legal problem with this. The Post Office, however, despite physically having the funds in their possession, has no regulations it must follow on this matter.
It is not required to perform KYC AML. It does not have to x-ray scan to find any cash or checks in their packages. Despite all of this, and openly inviting the public to use their services for it, not one post office is charged with conspiracy to commit money launderingacting as an unlicensed money transmitter. Previous precedents on what doesn't constitute as money laundering There's relevant precedent in the history of the US law regarding what constitute as money laundering. One such outcome of a case states that the government is required to prove the money was portrayed by the defendant as legitimate wealth before he could be charged with money laundering. This scenario was not directly relevant given that unlike this older case, samurai wallet was never in possession of Bitcoin that users sent through Whirlpool.
But in relation to the charges being conspiracy charges specifically, at no point did samurai wallet make any such legitimacy claims about Bitcoin that would go through Whirlpool. It's even more clear that the terms used in the statute conceal disguise did not apply to ricochet As Samurai Wallet have explained, a ricochet spend is very clear on chain, and does not provide privacy. Prosecution claiming otherwise in paragraph 27 in the indictment. The statement by the Supreme Court on this case from 2007 affirms that, it was not proven the defendant knew the purpose of his action was to conceal, or disguise the illicit nature of the money he had in his possession. This distinction makes it clear that it was irrelevant whether the defendant knew the effect would be said illicit nature would become concealed, disguised.
This matters in the case of Samurai Wallet given precisely the allegations made by the prosecutor. As the prosecutor claims samurai wallet performs zero check on who brings their Bitcoin to Whirlpool that means by default that samurai wallet have no information about any possible illicit nature behind the source of any Bitcoin. Given this fact, no purpose for using Whirlpool can be inferred by Samura wallet from any of the incoming Bitcoin. Another case was vacated despite the defendant pleading guilty for the reason that the profits were not used in the illegal activity. The term proceeds was initially interpreted by the court to imply all revenue of the illegal activity, which if held up would mean all criminal enterprise by definition would also be money laundering.
To prevent this becoming the precedent and keep the law's interpretation clear for its purposes, the district court established money laundering to be specifically related to the profits of illegal activity affirmed by the 7th Circuit. At the very least, this means that the prosecution cannot claim what samurai wallet did with the revenue of Whirlpool for maintaining the business, I e paying for servers to be relevant for any alleged money laundering. Prosecution claiming otherwise in paragraph 11 in the indictment. The US government's strategic campaign against privacy.
We all know that once you enter the realm that is the court of law, prudence becomes most important. Samurai wallet, in fact, understood this before the US government had made any moves as they kept track of any legislative moves made by the US government in relation to their judgment on Bitcoin's transactional nature. So when FinCEN took it upon themselves to leap for criminalizing basic transactions even so much as labeling not reusing addresses as specific behavior, samurai wallet responded in kind with a well formed legal letter signed by themselves and other significant companies in the Bitcoin ecosphere in an attempt to stop the attack on privacy dead in its tracks.
See Samurais blog: Our response to FinCEN Proposed Rules for Bitcoin Mixing There's roughly 3 months that went by between Samurais Wallet's response to FinCEN's proposal and their arrest. While we can speculate on a link between the two, there are more important things to consider that have happened since, given how all of this impacts all of us. The FBI campaign to threaten cryptocurrency users that they must use registered money transmitters. One day after the arrest and asset seizure, the government releases an alert on cryptocurrency money services businesses.
Here, the FBI, as the enforcement arm of the DOJ, seems to imply that any cryptocurrency related service must follow the money transmitter regulations because otherwise they can expect the same judicial overreach that has been used on samurai wallet. This is a very disturbing and worrying statement so closely timed to their arrest, for obvious reasons. They have no control over those who aren't a money transmitter, so they try to force everybody's hand to become a registered money transmitter. The effects of this have become very real already, as several services have responded by exiting the U. S, shutting down, or worse implemented KYC.
Shutdown Local Monero and AgoraDesk. US Exit, Wasabi Wallet and Phoenix Wallet US Exit HODL HODL US Exit IBEX implemented KYC, Speed wallet, and with this we can see the chilling effect of judicial overreach before the samurai wallet trial has even begun. The US government's pet witness can make claims you cannot refute. About a month before the samurai wallet indictment, Roman Sterlingov was convicted by the US government of operating an unlicensed money transmitter in a most curious case. The government alleges he was the administrator of the Bitcoin Fog custodial tumbler with attribution to Sterlingov primarily coming from IP address and blockchain forensic data provided by Chainalysis as an expert witness.
For their part, Samurai Wallet and OXT aided in the defense's preparation for the Dawbert hearings on the validity and admissibility of the Chainalysis software and heuristics. During the hearings several issues with Chainalysis methodologies were disclosed by Chainalysis head of investigations including both lack of error rate tracking and peer review of the Chainalysis code base. Despite these issues the judge of the case ruled that Chainalysis Reactor was admissible using pseudoscience logic. Additionally, both OXT and CipherTrace Sterlingov's main expert witness and a direct competitor to Chainalysis were effectively barred from review of Chainalysis proprietary black box heuristics.
CipherTrace was set to testify against Chainalysis heuristics and application of blockchain forensics use in a primary attribution methodology in criminal prosecution. However, 1 week before trial, CipherTrace was pulled from the case by their wholly owned subsidiary MasterCard. This meant that black box software, heuristics, and forensic methodology went completely unchallenged during trial allowing the government to railroad Roman Sterling off and obtain their desired guilty verdict for a crime he did not commit. This affects all Bitcoin related legal cases from that point on until an appeal overturns the validity of this expert witness.
Whatever statement this unchecked third party makes on any activity on Bitcoin's blockchain is now admissible evidence in a trial case and as was demonstrated in Roman Sterlingoff's case, you are likely not allowed to provide an expert witness of your own on the same subject matter. You receive some Bitcoin, you spend it somewhere, and at some unknown point in the future you are charged and arrested. You may want to claim you had nothing to do with a transaction 2 hops back from where you receive some bitcoin, but in the face of this now newly established authority, your claims make no dent in whatever they may claim, with your life hanging in the balance. The US government doesn't stop at its borders.
Another case in the same theme was that of Tornado Cash. Alexey Pertsev was arrested February 15, 2023, initially without charges and later charged with money laundering, Netherlands law. Roman Sterlingoff and Roman Semenoff were indicted August 25, 2024. For conspiracy charges, US law, money laundering, operating unlicensed money transmitting business, violates sanctions. It seems the US government has found its hammer to hit every nail with by charging privacy coders with whichever category they can easily get conspiracy convictions for. What's probably the most important consequence thus far in the ruling of Alexey Pertsev, the statement made by the judge reading the conviction was a most chilling one. Because they did not put any barriers in their software to oppose criminals who would want to use it for laundering. The defendant was found guilty of money laundering.
While the Pertsev trial did not occur in the US, what is shown in all these cases is the impact of the collaboration between the Western jurisdictions, Portugal, Iceland, Europol, the US government. These have worked together in the samurai wallet indictment and arrest. In Alexei's case, also the Netherlands. Likely any EU member state can be considered a part of this litigious covenant. This is important to understand for citizens of every EU member state. Your nation state may have a much easier time charging you for money laundering than the US would charging US citizens. Pertev was not charged with conspiracy.
He was charged and convicted for money laundering. In the Netherlands, the judges are also jury. Its constitution is no barrier for new legislation, and there is no supreme court to appeal to. Semri Wallet hosted their servers in Iceland. This jurisdiction was precisely chosen for the reason that the data center there had a policy to not comply with foreign nation state legal requests. The Icelandic government itself would have to follow their own laws using proper procedure before any request such as an asset seizure could be enforced in the data center. Given that the indictment is from the US government, this makes it clear the Icelandic government acted at the instruction of the US government to perform the asset seizure and take down samurai wallet servers. The impact on Bitcoin.
So now we are in the situation where several months in a row one privacy coder is put out of commission after another using lawfare and unjust procedures as a weapon already. They silence those who would voice their criticism of the government's proposal to make unregulated behavior illegal. They stop those who build privacy solutions, and put them in prison. 2 senators have already voiced their disdain for the situation. Senator Lummis stated how this stance contradicts existing treasury guidance, common sense, and violates the rule of law. She sent a letter together with senator Wyden urging the Department of Justice to reconsider its enforcement action in the case of samurai wallet.
Other well connected individuals such as Caitlin Long are also starting to take notice. We must reiterate that non custodial mixers are not money transmitters. No new law has been passed yet that that changes this, but the samurai wallet trial may set precedent such as they needn't go through the trouble of an acting new law. Given that the prosecutor claims samurai wallet have transferred funds on behalf of the public where there is no evidence of the sort because samurai wallet never did this. This could open up many possible interpretations of Bitcoin used by the government, all to the detriment of Bitcoin users.
This impacts at the very least lightning node operators they to perform no k y c a m l on their nodes before accepting incoming Bitcoin and passing it on to the next node furthermore mining pools could be held liable for not performing KYC AML for their mining payouts and if we go beyond the parts of Bitcoin that handle funds directly, even if non custodially this terrible precedent could even establish that any service which could potentially be used for criminals to obfuscate criminal activity could be held liable for facilitating this. Bitcoin's node implementations and the wallets people use may become the next target pending the outcome of this trial, but at that point Pandora's box has already been opened to go after any software or service.
Imagine signal messenger being prosecuted for conspiracy, because some criminals used it for encrypted communication. This is not hyperbole in the slightest. The US already has a terrible track record towards respecting the privacy of its citizens, but more importantly, it was a hard fought battle for the precedence in US law about the first amendment protection of code. This situation is likely to impact Bitcoin for all US citizens and citizens of foreign nations, EU member states, where the US government extends their enforcement upon. Bitcoin has its own history in relation to the US legislation, where it depends on its constituents to fight for their own rights to the freedom to transact, and their freedom to do so privately.
One such moment in history to join the fight is right fucking now. What you can do to help? Donate to the samurai wallet defense fund, p2prights.org. That link will be in the show notes. Fill in the form to make a tax deductible donation, or leave the information as n a, to make an anonymous donation. Put the following as the purpose of the donation USV Rodriguez and Hill SAMRII Wallet Print the leaflet we made. It briefly explains the situation and has a QR code to this page. Share them wherever you think best helps the cause, for example, at Bitcoin conferences.
Links to the flyer in English and links to the flyer in Spanish will also be in the show notes. Spread the word. Share this blog post. Talk to your friends. Have the conversation on podcasts, and use your social media platforms to raise awareness about this critical issue. Links to this free samurai article on the Ronin Dojo blog by Damn Cool will also be in the show notes. Stay informed. Follow updates on the case and learn more about the broader implications for the Bitcoin community. Additional links to resources will also be in the show notes.
[00:37:08] Unknown:
Thanks for listening. I wanna say a huge thank you to Damkool for writing this incredible article, keeping everyone up to date, and also to John for taking the time to narrate this. It takes a long time to do these things, and he took this out of his weekend where he could be spending time with his wife and kids, but he wants to make sure that people understand how important it is that they support samurai wallet and protect our privacy. If you want more content like this, check us out at Ungovernable Misfits dot com.
