Samourai Wallet Founders Accused of Facilitating $2B in Darknet Deals
In Brief
The apprehension of the Samourai Wallet founders represents a notable setback for the industry, underscoring the persistent struggle against illicit activities facilitated by crypto.
The founders of Samourai Wallet, a renowned crypto-mixing service, were apprehended and accused of several crimes, notably money laundering and money transmitting without proper licensing. They purportedly participated in laundering over $100M in criminal funds and facilitated over $2B in illicit transactions via their platform.
As per the indictment unveiled by the United States Attorney for the Southern District of New York, Keonne Rodriguez and William Lonergan Hill are accused of willfully aiding the laundering of significant sums of illicit funds sourced from illegal dark web marketplaces like Silk Road and Hydra Market.
Historical Background
Recall that the Silk Road gained infamy as a cyber black market specializing in illegal goods, marking the inception of dark web markets on the Internet. Established in 2011 and dismantled by the FBI in 2013, Silk Road set the stage for the flourishing underground economy of contemporary dark web marketplaces.
Hydra was taken down in 2022 and, in turn, functioned as a digital criminal hub catering primarily to Russian-speaking regions, facilitating anonymous transactions for a range of illicit products and services such as narcotics, compromised financial data, forged I.D.s, and money laundering solutions, all beyond the grasp of law enforcement. Although no single marketplace took the place of Hydra, the report indicated that smaller platforms are flourishing by catering to particular niches and assuming more specialized functions.
Samourai Wallet’s “Dark” Features
In these ventures, the mixing service functioned as a refuge for individuals involved in substantial money laundering endeavors and circumvention of sanctions. Through features such as “Whirlpool” and “Ricochet,” the platform provided users with the means to conduct anonymous financial transactions, posing challenges to tracking down the source of the funds.
An International Sting Operation
Rodriguez was apprehended in Pennsylvania, whereas Hill was detained in Portugal. The United States intends to pursue Hill’s extradition for trial proceedings. Concurrently, in coordination with Icelandic authorities, Samourai’s web servers and domain were confiscated. A seizure warrant was executed on the Google Play Store to eliminate the Samourai Wallet application from the U.S. region. These measures exemplify law enforcement’s resolve to clamp down on platforms enabling illicit activities and money laundering via cryptocurrencies.
The Significance of the Case for the Broader Crypto Sphere
The apprehension of the Samourai Wallet creators represents a notable setback for the cryptocurrency sphere, underscoring the persistent struggle against illicit activities facilitated by digital assets. Law enforcement has maintained apprehensions over the misuse of cryptocurrencies for money laundering and unlawful transactions, and this instance further underscores those apprehensions. While cryptocurrencies offer numerous advantages, such as decentralized transactions and heightened privacy, it is imperative to establish regulatory structures to deter their exploitation.
U.S. Attorney Damian Williams has stressed the unwavering commitment of law enforcement to pursuing and dismantling criminal enterprises that leverage digital assets to conceal unlawful activities. The collaboration among the IRS Criminal Investigation unit, the FBI, and international allies has played a pivotal role in capturing those accountable for running the Samourai Wallet platform.
Crypto and Darknet
Since the early 2010s, the Darknet and Bitcoin have had strong connections, as evidenced by many articles that are predominantly critical of Bitcoin.
So, Bitcoin became the darling of darknet users due to it is decentralized, meaning no central control, and allows for anonymous and practically untraceable transactions. Consequently, the Darknet’s numerous marketplaces facilitated trading narcotics, weapons, stolen data, and other illicit items and services using BTC.
According to Chainalysis, in 2023, identified illicit addresses received crypto-assets totaling USD 24.2 billion, representing 0.34% of the total on-chain transaction volume. This marks a proportional decrease from the previous year, where illicit activity constituted approximately 0.42% of on-chain transaction volume.
The infamous WannaCry ransomware incident in 2017 highlighted Bitcoin’s role in illicit activity, notably ransomware attacks. The attackers exploited vulnerabilities in Microsoft Windows systems, infecting hundreds of thousands of computers globally. Once infiltrated, WannaCry encrypted victims’ files and demanded ransom payments in Bitcoin for decryption. The attackers provided detailed instructions on acquiring and transferring Bitcoin to a unique Bitcoin address, making it difficult to trace transactions back to them.
But it’s not only about Bitcoin. Monero (XMR), for instance, is dubbed Darknet’s cryptocurrency of choice, for it is being favored by those to whom it is vital that their transactions are left untraceable. It stands out as a privacy-centric cryptocurrency, providing transactions that are fully anonymous and nearly untraceable. Diverging from Bitcoin and other decentralized cryptocurrencies, Monero incorporates advanced privacy measures to conceal both public wallet addresses and payment amounts. These distinctive attributes propelled XMR to become the preferred currency of darknet markets in 2016. Monero saw its value surge by nearly 2700%, surpassing all other decentralized currencies.
This trend continued in 2020 and 2021, with Monero experiencing increases of 242.7% and 83.3%, respectively, reaching a peak of $483.7 in May 2021.
Is it all on crypto, though?
Some maintain the belief that criminals primarily use Bitcoin and altcoins for criminal activity. Yet offshore banking systems are better suited for financing terrorist operations and facilitating money laundering than an anonymous, decentralized network used for transactions.
Certainly, BTC played a role in facilitating transactions within the darknet economy, notably exemplified by the Silk Road. However, in recent years, many darknet marketplaces have shut down, and for valid reasons. According to analysts from Chainalysis, darknet transactions thrived in 2019, largely facilitated by cryptocurrencies. Nonetheless, the volatile nature of these digital assets impacts their utility within the darknet ecosystem.
Community Reacts
The climate in the industry is already tense, with massive players like Coinbase and Ripple confronting the SEC. As another case unfolds, the crypto community shares its generally indignant sentiment, saying the U.S. government opposes private transactions.
Others exhibit inherent hostility.
Some are likely favorable.
The case around Samourai Wallet shines a spotlight on cryptocurrencies’ not-so-favorable side and the challenges faced in combating illicit activity within the industry. It serves as a stark reminder that the crypto ecosystem needs comprehensive regulations balancing privacy and security while preventing the misuse of digital assets for criminal purposes.
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About The Author
Zhauhazyn is a copywriter and sociology major. Fascinated by the intricate dynamics of Science and Technology Studies, she delves deep into the realm of Web3 with a fervent passion for blockchain.
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Zhauhazyn is a copywriter and sociology major. Fascinated by the intricate dynamics of Science and Technology Studies, she delves deep into the realm of Web3 with a fervent passion for blockchain.
