Crypto Mixer Samourai Wallet's Co-Founders Arrested for Money Laundering | Hacker News Reader

Crypto Mixer Samourai Wallet's Co-Founders Arrested for Money Laundering

wsj.com

45 pointspaulpauper94 comments

Here’s an exercise. Go to Wikipedia for “Money Laundering” -> “Notable cases” and sum the amounts laundered by all famous banks for the last 10 or 5 years.

Then try to say again that “crypto is for money laundering” with a straight face.

> Go to Wikipedia for “Money Laundering” -> “Notable cases” and sum the amounts laundered by all famous banks for the last 10 or 5 years

This is sort of like concluding bull riding is safer than eating food because more people have died from choking than bull riding.

It is sort of like saying that crypto is less money-laundery than banks because more money gets laundered through banks than through crypto.

It's a terrible argument though. If I ran a bank that literally only did money laundering, and I applied your logic, it wouldn't matter because, hey, others have done it more in aggregate.

Even then it's like, if I killed someone, I could say, well Americans in general have killed X many people, so I'm certainly less kill-y than Americans.

What's your point? That these people shouldn't have been arrested, or that money laundering on crypto should be ignored? Or something else?

Besides, crypto is clearly sometimes used for money laundering - hence the article.

I can at least say that people use banks for other reasons.

It turns out that money laundering is still money laundering even if you do it in a fancy, machine automatable way. It stuns me that people thought they had somehow beat the system by building technology like this. The government is going to be like, pretty ruthless in chasing it down.

Have you ever considered there may be legitimate use cases for such technology? Like normal Americans maintaining financial privacy?

Cash was a private, p2p currency before it was basically replaced with corporate, permissioned and surveilled credit.

Bitcoin is pseudonymous p2p money but the ledger is public. Obfuscating bitcoin to prevent 3rd parties from seeing your balance is not money laundering.

> Cash was a private, p2p currency

Cash is still currency.

> Obfuscating bitcoin to prevent 3rd parties from seeing your balance is not money laundering

No, but it's reasonably suspicious. And if whatever service you use to "mix" your money is connected to crime, it's not unreasonable for you to have costs involved with defending yourself.

> No, but it's reasonably suspicious. And if whatever service you use to "mix" your money is connected to crime, it's not unreasonable for you to have costs involved with defending yourself.

If I'm sending crypto to a friend, they can see my account balance, and my entire account history. It's perfectly reasonable for me to want to hide this.

I ran into this exact use case a few years ago, and ended up depositing into a centralized exchange, immediately withdrawing it to my friend's account, essentially using the exchange as a "mixer".

Albiet a KYC mixer whose database will inevitably be leaked.

But I digress.

> If I'm sending crypto to a friend, they can see my account balance, and my entire account history. It's perfectly reasonable for me to want to hide this

I never said there aren't reasonable reasons to want to mix. Just that it's also reasonable to cast that activity as suspicious.

It's not an enforcement priority to parse through just yet, but both bank compliance departments and law enforcement are buying Chainalysis et al's mixer decloaking data for a reason.

> I never said there aren't reasonable reasons to want to mix. Just that it's also reasonable to cast that activity as suspicious.

I agree. The problem I have is that the federal government is making it illegal to obfuscate the source of funds, in this case by going after mixers, the most reasonable way to obfuscate your identity when making transactions.

> If I'm sending crypto to a friend, they can see my account balance, and my entire account history.

"I've created a public ledger, only to realize it's a public ledger."

> No, but it's reasonably suspicious

So you agree there may be valid, legal, usecases for this technology for Americans?

The fact of the matter is Americans used to have a degree of financial privacy and the state is in the late stages of revoking it. Far more crime is done with USD than Bitcoin.

> Far more crime is done with USD than Bitcoin.

Duh? It would make sense that the de-facto currency for the IMF and state-level actors is more widely-used/abused than a nerdy toy network.

The volume of crime will always be larger on volumemetrically larger markets. Imagine the criminal-per-1000-users ratio of Bitcoin or Monero; now you're talking about something that no state-controlled fiat can match. That's why the government wants KYC, and they make a damn good case for it all things considered.

> That's why the government wants KYC, and they make a damn good case for it all things considered.

The government considers a man with cash as an enemy because bureucrates loves to see all your transactions on his computer and especially his favourite milestone is an ability to block some transactions. Government is just a stationary thug and it has no other goal except of collecting as much taxes as possible.

> Government is just a stationary thug and it has no other goal except of collecting as much taxes as possible.

You were speaking the truth, right up until you got to this line. Governments are beholden to the people, you wouldn't be able to adjust taxation legislatively if taxation was an authoritarian function of the state. Don't accuse the government of being a "stationary thug" when it's the politicians you elect that vote on these issues. If you legitimately believe what you said, you've bought into a defeatist ruse.

In reality, a government's greatest plausible obligation is to protect it's people, and that's what crypto regulations do. You can be as sardonic about it as you want, but tax and sanctions evasion is a crime and crypto exchanges will be treated as aides and abettors as long as they choose to deal in crypto.

> Governments are beholden to the people

I have not observed any example of this anywhere. I suppose you have bought into etatism ruse.

The existence of some legitimate use does not make the system not a money laundering system. Some legitimate money flows through all money laundering operations.

> Have you ever considered there may be legitimate use cases for such technology?

Ok, so we all are well aware of the illegitimate use cases for which crypto mixers are used - in vast volumes daily.

What are the legitimate use cases for which they are commonly used?

For activists working on causes where powerful people would like to unmask them. You can use mixers to end up with crypto for VPNs and other privacy services that aren't connected to your identity. Obviously you have to take 20 other steps as well. But this is in my opinion a very legitimate use case for this technology.

That definitely happens.

Meanwhile we know that these mixers are being used enmasse to sell exploitative content, fund terrorist organisations, evade tax, run scams, hacks, the list goes on, and on, and on, and on.

The problem is that the existing financial system also allows all these things. I have personally known many people who have lost money from a scam that their bank allowed them to transfer ridiculous amounts of money to. I also know people who have had their bank accounts arbitrarily frozen without prior notice.

If I have the risk of running into both these problems with the existing financial system, why not use Bitcoin? The problem is if I'm using Bitcoin, and want dollars to buy something from a vendor who doesn't accept it, I have to use a potentially hackable exchange that will then have my on-chain and personal information.

If I want a separation from the rest of my on-chain funds from those I send to an exchange, it's only logical to use a mixer. Even if I were Bitcoin only, I'd still want this level of privacy (unless all my transactions were digital and my on-chain identity was pseudonymous to all).

> Cash was a private, p2p currency before it was basically replaced with corporate, permissioned and surveilled credit.

Yes, but cash can also be used for money laundering.

If you operated a cash mixing service which was designed to hide the origin of the cash, and it was used to conceal criminality, you would be just as liable as operating a bitcoin mixer.

> Obfuscating bitcoin to prevent 3rd parties from seeing your balance is not money laundering.

Correct, but operating a service that does this which ends up obfuscating criminal money is money laundering.

So let's say people use cash as a technology for money laundering: they withdraw bank account balance to cash, and then transfer the cash as a way to break up the paper trail.

The equivalent to what is happening with cryptocurrency would be then to prosecute the director of the United States Mint. After all, she is almost certainly aware that physical cash is used for money laundering, but despite knowing that, she continued to run an organisation that produced more of the cash, allowing these criminals to continue money laundering. It is irrelevant that there are legitimate uses for physical cash - we just won't mention that, and focus on how much money laundering happened using cash that her organisation produced. The indictment would almost certainly be able to include evidence that money laundering using such physical cash helped Russian oligarchs and North Koreans.

But that argument is ridiculous. The creators of a technology which is helpful to the law-abiding public and also criminals should not be held responsible for the use of that technology by criminals (in cases where they actively incited criminal use, which might be the case here, it is a bit different). Should kitchen knife manufacturers be held liable if someone stabs someone with one? What if it can be proven that the knife manufacturers knew that statistically, given their size, someone would almost certainly use one of their knives for criminal purposes - or that criminals actually were - but they continued producing knives? As long as they aren't inciting that use case, they shouldn't be held accountable.

What if paper manufacturers learn that criminals are using their paper to create plans to commit crimes. Should they be held liable even if they don't incite the criminal usage, just keep making paper knowing that it is happening?

What about car manufacturers if people are using their vehicles as getaway vehicles? Bus companies that help criminals get to and from the scene of the crime (knowing that some are criminals, but not which exact individual in any specific case)? Supermarkets and water companies who sell food and water that help keep criminals on the run alive?

In my opinion, generally speaking prosecutors should only ever take on such cases if there is strong evidence that the people behind the technologies know that a specific person is going to use the technology for crime, and they help that specific person, or they actively promote the illegal uses.

And the proper order of events if for there to be a public discussion on whether something should be illegal, with legitimate consultation, and a decision made by democratically elected lawmakers, and there should be advance notice of the new law. Instead, in the case of cryptocurrency, prosecutors are trying to take a very tortured implementation of existing laws to twist something different into being illegal. Conspiracy laws are out of control if they don't even require talking to or knowing the people who are allegedly part of the conspiracy. Likewise, the money transmission angle used against mixers doesn't really pass the common-sense test; they are smart contracts that take funds in to one wallet, and spit them out to another wallet, but it is almost always the case that the input and output sources are owned by the same person. Transmitting is supposed to be tranferring from one person to another - you could technically set the output address to go directly to someone else, but that argument would apply to pretty much any smart contract ever. The intent of mixers is privacy, not money transmission.

So essentially they are using basically made-up charges to try to de facto make something illegal that democratically elected lawmakers have not come to a position on, and which doesn't make much sense.

They aren't prosecuting the miners who mint the coins - they are prosecuting the companies running mixing schemes.

Because of a flaw in Bitcoin, you need to be able to launder money? That's a weird logical leap.

I wonder if anyone's working on an entirely anonymous, decentralised version of Github where people can develop and publish software without facing persecution if their users do something the US government doesn't like?

Yes people do attempt crime every day, through mechanisms with varying degrees of equivocation, with varying degrees of success.

there is almost an anonymous, decentralised version of Github, and it was invented before Github.. it is the git software core. One major difference is that a commit must contain an email address identifier in the commit. The intent of the git software system is absolutely to prevent the seizure and gatekeeping by "law enforcement" or others

> operating an unlicensed money-transmitting business.

Can you be a money-transmitting business if you never have access to any of the funds being transmitted? Samourai only helps aggregate self-spending transactions from each user back to themselves.

Yes.

What non-circularly defines a money-transmitting business?

Here is the legal definition of a money transmitting business.

https://www.law.cornell.edu/uscode/text/31/5330#d_1

Part A:

> provides check cashing, currency exchange, or money transmitting or remittance services

says that Samourai is a money transmitting business iff they provide a money transmitting service. Part B:

> accepting currency, funds, or value that substitutes for currency and transmitting the currency, funds, or value that substitutes for currency by any means

says that they must be accepting currency/funds/value, which they don't appear to be. They only accept instructions from each user for how to spend funds to themselves.

> provides check cashing, currency exchange, or money transmitting or remittance services

They're exchanging currency. (SWIFT is just a messaging service, for example.)

That's right, a crypto mixer that affords true privacy (except relative to the mixer itself) w/o additional controls (e.g., transaction limits comparable to practical limits on cash transactions) is definitely a money laundering enabling capability.

Whether one can conclude that the people running the crypto mixer are engaging in criminal activity will depend on the text of the relevant statutes, though I'm pretty sure those will be fairly airtight.

https://archive.ph/MhYUz

They don’t mix “crypto”. They are very much anti “crypto”.

They build Bitcoin mixing software.

People have longed said that crypto has no use cases. They're clearly wrong. There is only one true use case for crypto: Making it easier to skirt the law.

This includes: selling/trading unregistered securities, scams, rug pulls, money laundering.

Simple counterexample: I've use crypto to pay out bounties to anonymous coders for doubling the performance of my open source software.

You have a sample size issue for your counter.

It's a huge movement happening in the OSS space but HN refuses to acknowledge it.

Do you have any stats to support this is some “huge movement” relative to whatever is considered standard practice? I ask this as an honest question since I’d never heard of the phenomenon, but am not steeped in OSS dev work by any means.

HN unfortunately isn't very objective on this particular subject.

It let me purchase and sell a small software app without going to the bank, signing documents, paying $75 just to orchestrate a wire transfer.

Yes, skirting the law. Banks/payments have regulations.

Nothing wrong / illegal about what we did. Legitimate business, Used stable coins, filed taxes.

Not the point. Crypto skips all the regulations.

> Not the point.

No that's exactly the point. The point is what is a legitimate use case for crypto, this use case is getting around pointless bureaucracy. You don't get around regulations, the responsibility of adhering to them just shifts from a third party to you, hence the person you're replying to paid taxes.

Are you implying avoiding operating fees is not a valid use case? Operating fees help facilitate adherence to regulation at scale but they themselves are not the regulation.

Why do you think it's doing so well?

This includes

- making donation to ukraine if you're russian

- not have your asset frozen if you protest and the canada government disagree

- protecting yourself against false accusation

- protecting again a country that would turn communist in an election (closer than you think in some european ones)

- getting an additional veil of anonymity if you have to do something illegal in your state such as abortion or defending gay rights.

so yeah this is 'against the law' but sometime the law is not on the good side.

> making donation to ukraine if you're russian

Crypto, much less crypto from Russians, hasn't been a meaningful contribution vector for Ukraine. Even when we look at the crypto donated, most (EDIT: half) of it was dollar denominated [1].

[1] https://www.coindesk.com/consensus-magazine/2023/07/27/ukrai...

> Even when we look at the crypto donated, most of it was dollar denominated [1].

Have you at least read your source? 120 of 225M were BTC + ETH.

> Crypto, much less crypto from Russians, hasn't been a meaningful contribution vector for Ukraine.

Crypto is there barely since the Second Maydan, of course Ukrainians managed to survive without cryptocurrencies.

If you look closely on your arguments, you will find just a rejection without any arguments. Didn't you observe the recent news about Xenia Havana who donated $50 from her American bank account being in Russia and therefore went into jail?

> 120 of 225M were BTC + ETH

Sorry, meant to say half. Corrected. Thank you.

> Xenia Havana who donated $50 from her American bank account being in Russia and therefore went into jail?

$50 is not meaningful.

> $50 is not meaningful.

for her it is, in many ways

> for her it is, in many ways

Sure. I never said crypto is useless. But something being randomly meaningful to one person doesn't make it "a meaningful contribution vector for Ukraine."

> $50

A human went to jail because of using obsoleted money transaction technologies and you are really judging the fact by the amount of her donation - just to protect your misjudgement about cryptocurrencies? Are you even Ukrainian?

> Sorry, meant to say half. Corrected. Thank you.

Even if it would be 99%, so what? Why are using this as an argument?

> judging the fact by the amount of her donation

I said the dollar amount isn't meaningful. Because the original claim was that "crypto, much less crypto from Russians, hasn't been a meaningful contribution vector for Ukraine."

> Even if it would be 99%, so what?

It means crypto is being used to send U.S. dollars. It's a derivative financial system, and one completely subject to U.S. law, surveillance and sanctions.

The Ukraine example is not a case study for crypto delivering value add at scale.

> I said the dollar amount isn't meaningful. Because the original claim was that "crypto, much less crypto from Russians, hasn't been a meaningful contribution vector for Ukraine."

Your saying isn't reasonable because you are talking about tangential things to cryptocurrency. Ability to donate from/to some dissidents despite of crazy thugs is meaningful. Amount of donated funds by Ukrainian anti-Russian adventure is not.

> It means crypto is being used to send U.S. dollars. The Ukraine example is not a case study for crypto delivering value add at scale.

It is as reasonable as to say that USD is being used to send Bitcoins. Why not, aren't you able to buy Bitcoins with USD?

> Ability to donate from/to some dissidents despite of crazy thugs is meaningful

Sure. Still isn't "a meaningful contribution vector for Ukraine."

> as reasonable as to say that USD is being used to send Bitcoins. Why not, aren't you able to buy Bitcoins with USD?

No, it absolutely isn't. The U.S. Treasury isn't holding a pot of Bitcoins to back its value. A stablecoin holds dollars or dollar-denominated assets. This is particularly germane given the context of money laundering.

> Still isn't "a meaningful contribution vector for Ukraine."

I don't say an opposite. An entire counter-claim about "donations to Ukraine was only 217M" is not an argument against Bitcoin, despite your efforts to present it so.

> The U.S. Treasury isn't holding a pot of Bitcoins to back its value.

LOL the crypto is one of established commodities perfectly fitting for inter-government trade.

> A stablecoin holds dollars or dollar-denominated assets. This is particularly germane given the context of money laundering.

I don't understand why it is important. A couple of thugs believes they can call "money laudering" anything they don't like, and what? Their presence is clearly diminishes because they have no ways to control cryptocurrencies.

Dollar denominated crypto is still crypto.

> Dollar denominated crypto is still crypto

Sure. But within the context of a money-laundering article, it's important to note that dollar-denominated crypto exists at the whim of the U.S. government. It is globally subject to U.S. jurisdiction, and uniquely vulnerable to U.S. surveillance and sanctions.

This is not a property of stable coins, but of permissioned stable coins only. Decentralized permission less stableclins like DAI etc. are beholden to none.

The volume of contribution is not the point.

Also if you are Russian living outside of Russia then good luck having a bank account, since European scumbags effectively consider any Russian as villain.

hence crypto.

Also there are many other countries than europe and russia

Which European countries are close to becoming communist? And what protection does it offer then if said communist countries use violence to collect private wealth?

Mélenchon in France has big scores wants to take 100% (everything) on income tax above 30k per month per individual. Do this and I will instantly get paid in crypto and have a new nationality

Even if that were to happen (which I cannot see as the PS polls around 12%) it would be a far cry from actual communism. Also, how would crypto help if the situation would be permanent and you stayed there?

Bit of a tangent, but the fundraiser that the Canadian government froze was initially organized by a Canadian secessionist and a white nationalist, and during that protest (and possibly unrelated) weapons were seized at a border crossing from members of diagalon, a white nationalist group that wants to carve out parts of Canada and USA to make a “white” nation.

Unlike your other examples, that one is an example of using crypto for nefarious reasons.

You mean the Diagolon group who's leader is a cocaine using ceramic time travelling goat ?

https://www.tiktok.com/@alphaaaroxy_teammoto/video/716155578...

The Diagolon that the House of Commons said was a "violent extremist organisation." but has never committed a crime ?

The same Diagolon that the RCMP determined: "DIAGOLON does not pose a criminal or national security threat." - Royal Canadian Mounted Police https://finance.yahoo.com/news/documents-reveal-shocking-rcm...

Diagolon is a meme and you don't get it, which is ok but stop spreading misinformation.

Ah, so there was a procedural issue in prosecuting the group with a cache of guns that wants to carve out a white nation out of Canada and the US. My mistake.

This doesn’t change the point that from the perspective of the Canadian government, they were facing 2 racist separatist groups at a time, and one of the groups was raising a LOT of cash while leading an occupation of the capital.

This is a valid scenario for seizing funds, though maybe the fact that groups like Diagalon and Wexit are a “meme” should be considered more closely.

Where are these racist separatist groups coming from ?

Sure Wexit is a separatist group but I fail to see where you are getting racist from.

One of the originators of Diagolon is black.

In the case of Wexit, Tamara Lich was a founder, and she buddied up with Pat King for the fundraiser, who is a self avowed white supremacist, like he's literally on twitter saying white people have the "strongest" bloodline.

If someone who is involved with multiple "Canada for Canadians" movements joins forces with a known racist, I would take the odds and bet good money that person is a racist.

I was talking about the truckers during covid. and once again : not the point. Money is neutral, it's what you do with it that's bad.

The law pretends decidiing everything about right or wrong, but there are plenty of legitimate cases where the law is on the wrong side.

> one true use case for crypto: Making it easier to skirt the law

And gambling. That's a $580bn market on its own [1]. Add to that the $2 to 5tn of money laundering that occurs globally [2][3], assume a 15% take rate, and on the upper bound you have another $580bn market. Curiously, adding those together one gets 91% of the current "market cap" of Bitcoin [4].

Really, all Bitcoin has to do is displace every casino and every cartel and it would be worth over 90% of its current price.

[1] https://www.thebusinessresearchcompany.com/report/gambling-g...

[2] https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp0210...

[3] https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVE...

[4] https://coinmarketcap.com

I subjectively disagree with your sentiment but can objectively show you are not accurately quoting your sources. Source [2] and [3] show nothing about $2-$5 trillion dollars being laundered globally. [2] links to an article written in 1998 presumably re-published in 2015 because of the number's presence in the url path, and [3] links to the 'GDP, current prices' of the IMF. Maybe your estimate for the amount of money laundered globally is factual, but your links definitely don't show that.

Also, nothing is "curious" about you adding rough estimates together and getting a random percentage of something else.

> There is only one true use case for crypto:

Same with the second amendmend: the only one true use case for firearms is

> Making it easier to skirt the law

...if (not if, when) the Government goes nuts.

Only if it goes "nuts" in very specific ways: Anything that means the government can exercise large scale organized violence while backed by a sufficient number of people means it doesn't help.

That is not a "very" specific way considering that the government has monopoly on violence by definition of the government.

Actually most of the governments are exactly on that ground abusing the fact that only few countries allows the citizens to own firearms.

The stuff only helps if the government goes weakly nuts - otherwise unlikely to help much.

The large number of guns in Germany wasn't doing anything against the Nazis. The idea of violently overcoming an organised tyrannical and violent government that has millions of people supporting it is largely a US myth. Maybe the Russian revolution qualifies - but that kind of swapped things only.

> idea of violently overcoming an organised tyrannical and violent government that has millions of people supporting is a US myth

It's designed to increase the cost of an unpopular takeover, not let Joe who thinks he can shoot 100 yards with a glock take on the U.S. army. The Nazis were popular when they came to power. Contrast that with e.g. Hong Kong.

You are making my point: it is largely useless when considering how powerful but evil governments have formed or oppressed some minorities etc.

Guns aren't a good analogy and the arguments against guns making a meaningful difference for a non-violent minority don't make as much sense. Money separated from state at least prevents the non-violent minority from having the fruits of their labor power those who might end up oppressing them.

Somehow the government has brainwashed almost everyone into thinking that money laundering is wrong and evil. Money laundering should not actually be a crime. Moving money should not be called laundering at all. It is a victimless action. Money is personal property, and one should be free to send or receive it. It is a fundamental right that the world hasn't woken up to yet, but what would we expect in a country that still practices forced slave labor of a million people in prison. If the money were to be used to perform criminal actions where there is a victim, then those criminal actions are crimes instead. Money laundering is about state power, about the state having the right to exploit people's lives. The same people who believe in the concept of money laundering will also take away your right to other freedoms, e.g. encryption/AI dev/access/usage, and basically anything that gives you any bit of power. Disclaimer: I have no financial interest; my only interest is in the purity of freedom.

> Moving money should not be called laundering at all

Moving money--or even obfuscating it--isn't a crime. It's a crime to conceal the source of illegally-obtained money.

> if the money were to be used to perform criminal actions where there is a victim, then those criminal actions are crimes instead

They are. But they also create an additional crime because money laundering helps criminality scale. (Petty crooks don't launder their money.)

(deleted)

putting aside morality, much of the law in the US conforms to that bar. See backpage, Megaupload, silkroad, ect.

1/surprisePikachu.png

Money corrupts; bitcoin corrupts absolutely. Disregarding all of bitcoin's shortcomings, a financial instrument that brings out the worst in people—greed—won't change the world for the better. https://www.cynicusrex.com/file/cryptocultscience.html

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