Samourai Wallet, a Bitcoin privacy service, has been shut down and its founders arrested! 😱
A Bitcoin-only noncustodial CoinJoin service, Samourai gave users privacy by allowing them to coordinate with other users to mix their funds to break the transaction graph.
To the best of my knowledge (obviously I don't know all the details), they did nothing wrong! Simply operating a privacy protocol that allows users to strengthen their own privacy should not be a crime!
This continues to set the horrible precedent that the Tornado Cash arrests began, criminalizing the development of open-source software.
Is all privacy in crypto now under legal threat? 😬
I don't think so. But the fact that I don't know for sure anymore is concerning.
Taking a step back, though, let's look at some of the things focused on in this case to see if we can find a common thread. Remember, many privacy protocols, including the Zcash team, has not fallen victim to anything like this (yet).
According to the DOJ, Samourai:
🕵️Was a company-like entity (profited)
🕵️Explicitly provided services for privacy
🕵️Operated infrastructure directly
🕵️Openly advertised to criminals
🕵️Had criminal activity traced to the service (including sanctions evasion, which the US war machine particularly doesn't like)
🕵️Evidence founders knew about this
Judging from the Tornado Cash case, as well as the SEC going after Uniswap, it seems like the "It's noncustodial and open-source" loophole doesn't work anymore:
If you operate like a company, run infra/front-ends like a company, take profit like a company, you probably will get targeted!
Of course, the sad part in all this is, we don't actually know how for sure how to develop crypto while staying out of jail! This is just speculation (and definitely not legal advice, before someone comes at me).
We should be able to develop privacy tools without fear of prison. But that's not the reality of 2024.
In the meantime, probably the best route is to bake privacy directly into the protocol, without segregated third-party apps or smart contracts run by teams who can be explicitly targeted and accused of laundering.
Privacy by default is the way!
If the core protocol inherently lets users be private, and it has many legitimate uses, it's much harder to make the case for laundering or anything criminal by the developers.
But just in case, open-source privacy devs should probably stay outside of the US and western Europe, and stay as anonymous as possible.
We're building the free financial system of the future. We are doing nothing wrong, but this is inherently a threat to the powers that be! We can try to make sure we stay fully legally-compliant. But we're never going to be 100% sure.
Sad day. Free @RealRossU
, free @alex_pertsev
and the Tornado Cash crew, free @FTL_Ian
, now free @SamouraiWallet
