So long as uninformed speculation is running loose... Lavabit's comment that "If you knew what I know about e-mail, you might not use it either." points in a email specific direction as opposed to simple sniffing of traffic.

Perhaps he is referring to the Stored Communications Act ( http://en.wikipedia.org/wiki/Stored_Communications_Act ). I haven't seen it referenced in coverage of this but the gist is under the right circumstances email that is older than six months and stored on a server that you don't own can be accessed without a warrant. Lavabit's encryption process as described would interfere with that. Not being able to comply AND being unwilling to take steps to comply in the future is the sort of thing that feds don't like.

This wasn't a big deal when it was passed in 1986 and small mail quotas were the norm but now with IMAP, multiple devices, and archiving it becomes a pretty big issue as you are talking about someone's electronic life instead of abandoned mailboxes.

AFAIK the issue of Fourth Amendment issues and SCA hasn't made it to the Supreme Court yet so interpretations vary depending on circuit.