The two founders of the popular bitcoin wallet Samourai and the Coinjoin service Whirlpool were arrested this Wednesday by the American authorities.
Samurai Wallet in turmoil
Keonne Rodriguez and William Lonergan Hill were arrested in Portugal and Pennsylvania on the orders of the United States Department of Justice.
The servers located in Iceland as well as the domain name of the website (https://samourai.io/) were seized. The app – downloaded more than 100,000 times – is no longer available on the Google Play Store in the United States.
The two developers are accused of “complicity in money laundering” and of “unlicensed money transfer”. The accusations relate in particular to their Coinjoin service (Whirlpool).
A Coinjoin is a transaction comprising the bitcoins of several participants. The aim of the operation is to blur the lines so that an outside observer can no longer tell which bitcoins belong to whom.
New York court reveals more than $2 billion in transactions “illegal” went through Whirlpool which would have facilitated “over $100 million in money laundering transactions from illegal dark web markets such as Silk Road and Hydra Market “.
According to the Justice Department, Samourai collected the equivalent of $3.4 million in user fees for its Whirlpool service and $1.1 million for its Ricochet service.
Money laundering and… complicity?
The heart of the accusation concerns the appeals to criminals of all kinds, neo-Nazis included.
“While presenting Samourai as a 'privacy' service, the defendants knew it was a haven for criminals engaged in large-scale money laundering and evasion Sanctions “can we read in the charge.
The complaint specifically highlights the fact that Keonne Rodriguez publicly invited Russian oligarchs to circumvent US sanctions.
Another Samourai wallet service in question: “Ricochet”. This tool allows you to carry out intermediate transactions (called “hops”) between the sending address and the destination address.
“Ricochet can prevent exchanges from detecting whether bitcoins come from addresses affiliated with criminal activity”explains the DoJ.
Note that the investigation team was able to access private messages on X. This message from William Lonergan Hill is highlighted:
“We probably have different views on some basic principles of bitcoin. To each their own. At Samourai, we are entirely focused on censorship resistance and the circular black/gray economy. This does not imply mass adoption [du Bitcoin] in the medium term, although black/gray markets have already started to develop during Covid […]. »
Will Coinjoins be unraveled?
The co-founders risk 25 years in prison. William Lonergan Hill (65 years old) could therefore end his days in prison.
The question is therefore: Will he cooperate to alleviate his sentence by communicating the “xpub” of Whirlpool users? Explanation :
There are two schools for carrying out a Coinjoin transaction. It can either bring together many participants, which is what the Wasabi wallet does. Or bring together very few participants, which is what the Samourai wallet does.
The problem with small coinjoins is that they require a preparation transaction. It is used to create several utxos of the same amount as well as to isolate the “doxxic change” in a distant branch of the wallet.
However, this process requires users to reveal their “xpub”. In other words, Samourai was able to know the total amount of a user's wallet (unless they had their own “dojo”).
All this to say that the coinjoins made with the Samourai wallet could be unraveled in the event of cooperation of the founders with Justice.
Eyes are now turning to Wasabi and Trezor who both offer coinjoin coordinated by the company zkSNACKs. The latter, however, filters addresses affiliated with criminal activities using Chainalysis. So she shouldn't be worried.
Here are several articles about how Coinjoins work:
–Bitcoin Coinjoin – How does it work?
–Bitcoin Coinjoin – Wasabi vs Samurai
–Which wallet should you choose to obscure your bitcoins?
–Trezor and Wasabi spark controversy
Community reactions
The founders of Samourai have a sulphurous reputation. and have not only made friends over the years. @alpacasw says for example:
“Bitcoin is not under attack. It's being attacked by two arrogant and incompetent developers who have openly courted criminals, pissed off the police, and jeopardized the safety of their users. Make a difference. »
Or the co-founder of the Ocean pool:
However, messages of support are more numerous. Like this one from @jessicasolce:
“At no time did Samourai take control of users' money. They made it easy to transfer $0. »
Let us end by emphasizing that we must not confuse “money laundering” and “private life”. No amalgamation is possible.
Privacy is a fundamental right offered by Coinjoins. Laundering involves money linked to criminal activities.
Coinjoin coordinators whose code is open source should not be held responsible for the origin of bitcoins. However, governments do not see it that way. Samourai's mistake was to have publicly solicited the crime's money.
Here is a guide to recover your bitcoins that would be blocked on the Samourai wallet.
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