Two cuffed in Samourai Wallet crypto dirty money sting

Two men alleged to be co-founders of cryptocurrency biz Samourai Wallet face serious charges and potentially decades in US prison over claims they owned a product that facilitated the laundering of over $100 million in criminal cash.

Keonne Rodriguez and William Lonergan Hill, both US citizens, were arrested on Wednesday for their alleged roles in the Samourai Wallet operation, which the Department of Justice (DOJ) says transacted over $2 billion.

Rodriguez, a US national who resided in either Florida, Pennsylvania, or the United Kingdom throughout the time of his alleged involvement with Samourai, was CEO of the operation. CTO Hill was also a US national but lived in France for the entire period the company was operating, from 2015 until February this year.

Rodriguez was arrested in the US and is due to appear before a magistrate judge in the Western District of Pennsylvania today. Hill was arrested in Portugal and is awaiting extradition.

Per the indictment [PDF], the pair are said to have earned $4.5 million in fees over the nine-year period of running Samourai. In addition to facilitating money laundering, Feds claim the company was also a money-transmitting business operating outside of AML and Know Your Customer regulatory rules.

It also didn't help that it the Feds alleged the business was also used to wash funds connected to two of the most notorious dark web marketplaces in history, Silk Road and Hydra Market.

Drugs and fake ID emporiums aside, the DoJ claimed Samourai was used to launder the proceeds of various other types of cybercrime including spearphishing campaigns, schemes to defraud decentralized finance protocols, and server intrusions, among others.

Samourai Wallet itself offered two products that the DoJ appealed to miscreants looking to cover their digital tracks. Ricochet, which started in 2017, offered users the chance to introduce "hops" to their transactions. This involved adding an intermediary address between criminal transactions, which the DoJ said could make authorities' efforts in linking transactions to crime more difficult.

Whirlpool launched in 2019 and acted as a typical crypto mixer, or tumbler, whichever you like. It would take batches of users' transactions, jumble up all the tokens, and redistribute them among the same users.

Again, this service is typically sought by people who don't want the police to know what their tokens are being used for, or what they did to acquire them.

It would make little sense to use these services unless a user had a good reason, since they cost a pretty penny to use. Whirlpool is estimated to be the most lucrative of the two services, allegedly netting the accused around $3.4 million, while Ricochet, which launched two years earlier, is said to have brought in around $1.1 million.

"As alleged, Keonne Rodriguez and William Lonergan Hill are responsible for developing, marketing, and operating Samourai, a cryptocurrency mixing service that executed over $2 billion in unlawful transactions and served as a haven for criminals to engage in large-scale money laundering," said US attorney Damian Williams.

"Rodriguez and Hill allegedly knowingly facilitated the laundering of over $100 million of criminal proceeds from the Silk Road, Hydra Market, and a host of other computer hacking and fraud campaigns. Together with our law enforcement partners, we will continue to relentlessly pursue and dismantle criminal organizations that use cryptocurrency to hide illicit conduct."

The US worked with Icelandic law enforcement to seize Samourai's servers and domain. Visits to its website now display the US trademark we-pwned-you splash page, thanking the FBI, IRS, Europol, and police from both Portugal and Iceland for their role in the operation.

US users are also no longer able to download Samourai Wallet after the DOJ told the Google Play store to take it down. It is, however, still available to download in Europe, and its store page shows it has been downloaded more than 100,000 times.

Both Rodriguez and Hill are facing maximum sentences of 25 years. They both face a count of conspiracy to commit money laundering, which carries a maximum 20-year term, and one count of conspiracy to operate an unlicensed money-transmitting business. You can get five years maximum for that.

"Threat actors utilize technology to evade law enforcement detection and create environments conducive to criminal activity," said James Smith, assistant director in charge at the FBI. 

"For almost 10 years, Keonne Rodriguez and William Hill allegedly operated a mobile cryptocurrency mixing platform which provided other criminals a virtual haven for the clandestine exchange of illicit funds, the facilitation of more than $2 billion in illegal transactions, and $100 million in dark web money laundering. 

"The FBI is committed to exposing covert financial schemes and ensuring no one can hide behind a screen to perpetuate financial wrongdoing." ®