US Justice Department Indicts Creators of Bitcoin-Anonymizing 'Samouri' Wallet (reason.com) 92
America's Justice Department "indicted the creators of an application that helps people spend their bitcoins anonymously," writes Reason.com:
They're accused of "conspiracy to commit money laundering." Why "conspiracy to commit" as opposed to just "money laundering"?
Because they didn't hold anyone else's money or do anything illegal with it. They provided a privacy tool that may have enabled other people to do illegal things with their bitcoin... What this tool does is offer what's known as a "coinjoin," a method for anonymizing bitcoin transactions by mixing them with other transactions, as the project's founder, Keonne Rodriguez, explained to Reason in 2022: "I think the best analogy for it is like smelting gold," he said. "You take your Bitcoin, you add it into [the conjoin protocol] Whirlpool, and Whirlpool smelts it into new pieces that are not associated to the original piece."
Reason argues that providing the tool isn't a crime, just like selling someone a kitchen knife isn't a crime: The government's decision to indict Rodriguez and his partner William Lonergan Hill is also an attack on free speech because all they did was write open-source code and make it widely available. "It is an issue of a chilling effect on free speech," attorney Jerry Brito, who heads up the cryptocurrency nonprofit Coin Center, told Reason after the U.S. Treasury went after the creators of another piece of anonymizing software...
The most important thing about bitcoin, and money like it, isn't its price. It's the check it places on the government's ability to devalue, censor, and surviel our money. Creators of open-source tools like Samourai Wallet should be celebrated, not threatened with a quarter-century in a federal prison.
Long-time Slashdot reader SonicSpike shared the article...
Because they didn't hold anyone else's money or do anything illegal with it. They provided a privacy tool that may have enabled other people to do illegal things with their bitcoin... What this tool does is offer what's known as a "coinjoin," a method for anonymizing bitcoin transactions by mixing them with other transactions, as the project's founder, Keonne Rodriguez, explained to Reason in 2022: "I think the best analogy for it is like smelting gold," he said. "You take your Bitcoin, you add it into [the conjoin protocol] Whirlpool, and Whirlpool smelts it into new pieces that are not associated to the original piece."
Reason argues that providing the tool isn't a crime, just like selling someone a kitchen knife isn't a crime: The government's decision to indict Rodriguez and his partner William Lonergan Hill is also an attack on free speech because all they did was write open-source code and make it widely available. "It is an issue of a chilling effect on free speech," attorney Jerry Brito, who heads up the cryptocurrency nonprofit Coin Center, told Reason after the U.S. Treasury went after the creators of another piece of anonymizing software...
The most important thing about bitcoin, and money like it, isn't its price. It's the check it places on the government's ability to devalue, censor, and surviel our money. Creators of open-source tools like Samourai Wallet should be celebrated, not threatened with a quarter-century in a federal prison.
Long-time Slashdot reader SonicSpike shared the article...
They did a lot more than just make a mixer (Score:5, Informative)
They provided a privacy tool that may have enabled other people to do illegal things with their bitcoin
They were literally going around telling folks that they were gray and black market friendly. Actively promoting folks to launder money via their mixer.
At Samourai we are entirely focused on the censorship resistance and black/grey circular economy
They didn't just build a mixer, they were out promoting folks to do the thing that you are specifically not supposed to do on mixers.
So this is far from the crypto hate that coindesk.com in the linked article is trying to imply. They were doing the thing out loud that you aren't supposed to do out loud. They're facing indictment because they were being stupid. This is very much a FAFO moment for them.
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That being said, its still used for money laundering to this day.
Re:They did a lot more than just make a mixer (Score:5, Informative)
Re: They did a lot more than just make a mixer (Score:3)
So the mixer stops the authorities from tracking the transactions back to criminals by 'laundering' bitcoins.
Just be aware that bitcoins themselves are going to be worthless if they can't be exchanged to real money in the bank. So the governments can pull the plug if they like.
The fact that they did strike this operation means that they probably were able to track bitcoins already from an early stage, but saved the capability to do that in order to be able to reel in the big fish, but at the same time colle
Re: They did a lot more than just make a mixer (Score:4, Interesting)
Re: They did a lot more than just make a mixer (Score:5, Interesting)
Their political masters and their computer crime departments are. The FBI has deep, historic flaws of "going after the big fish by getting little fish to be narcs". The result was White Bulger, Jimmy Hoffa, and convicted hackers like Kevin Mitnick committing crimes while pretending to "discover" crimes for the FBI. Their Computer Crime Lab convicts _no one_, the computer crimes reported by the FBI are inevitably solved by third parties despite, not because of, FBI involvement.
Re: They did a lot more than just make a mixer (Score:5, Insightful)
So the mixer stops the authorities from tracking the transactions back to criminals by 'laundering' bitcoins. ...
The fact that they did strike this operation means that they probably were able to track bitcoins already from an early stage,
A bitcoin wallet is anonymous right up to the point the owner chooses to link their real world identity to the wallet identity.
Most people choose to give up that anonymity as it makes it far easier to exchange bitcoin for real world money.
Your username "Z00L00K" is perfectly anonymous until you choose to give that up and link it to your real world identity.
But once you show someone in the real world that this is your slashdot handle, now they can see all the past posts under your username and know you made them.
Similarly, once you know this wallet ID is me, you can now see all past transactions I made with that wallet and know it was me that did it.
Yes, the mixer service is just laundering.
It takes a bunch of people making transactions into new wallets never before seen used.
Then it is transferred out of the blockchain. Afterward new wallets (also never seen used before) suddenly receives transfers of different random amounts, that total amount earlier, into them from outside.
This new never before seen source of funds is then used to transfer back to the original people that put into it.
If you saw 123456.78 transfer from wallet A out of the network, and an identical 123456.78 transfer in to wallet B, it's reasonable enough to just infer this was actually money going from A to B.
With the mixer, you see thousands of different random seeming amounts leaving the blockchain to the outside.
Later there are thousands of different random seeming amounts entering thousands of brand new never used before wallets from outside.
None of those thousands of amounts will match. They would all total up the same, but they spread this out over enough time and enough small amounts that you can't really know for sure.
If you think about it, it isn't unlike how a banks many customers all make deposits of random amounts, and later their many customers make withdraws of many amounts.
The total amount out can't exceed the total amount in, but looking at it over long periods of time, the bills you withdraw can't be traced (by you) back to who the original depositors were.
The bank can do that, because they keep track of all that. The mixer intentionally does not record anything, so that information is just lost.
and yes, that is straight up money laundering. A bank would be in deep trouble if they did that and didn't keep records.
This really is the same thing. The only difference is, they aren't providing a service like a bank does, they provided software to let the money launderers provide that service collectively for themselves.
So when its said they are "enabling money laundering" even without doing it themselves, that is simply a fact of reality.
Their only argument is that enabling shouldn't be a crime, and ofc the justice department is arguing it should be and is a crime.
(I'll leave my opinion on the "should/should not be" out of it. You can form your own opinions on that topic.)
Re: They did a lot more than just make a mixer (Score:4, Informative)
So when its said they are "enabling money laundering" even without doing it themselves, that is simply a fact of reality. Their only argument is that enabling shouldn't be a crime, and ofc the justice department is arguing it should be and is a crime.
Yeah I think the Justice Department here is going to be using exactly what the OP used as the basis for their case. IANAL but pretty sure with conspiracy charges much of it rests on mens rea in that when doing said action the people know and willingly do something they know is a crime or would enable a crime, and in the DOJ statement they claim this
Similarly, RODRIGUEZ and HILL possessed and transmitted to potential investors marketing materials that discussed how Samourai’s customer base was intended to include criminals seeking privacy or the subversion of safeguards and reporting requirements by financial institutions. For example, in Samourai’s marketing materials, RODRIGUEZ and HILL similarly acknowledge that the individuals most likely to use a service like Samourai include individuals engaged in criminal activities, including “Restricted Markets.”
Not a good look for the crypto guys here if true because this is like rookie level criminal stuff, you have to at least make the attempt to play in the rules. [youtube.com]
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Mixers don't provide anonymity but rather plausible deniability. Instead of a transaction having a send, receive, and change address, you mix multiple transactions together so that there are 10 senders and 10 recievers.
Keep doing the same thing over and over, statistical analysis will sus you out, should anyone care enough to bother doing the math.
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Saying "smart people figured out" is a bit misleading. This was never some secret stratagem it's just how bitcoin works, it was never anonymous.
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Bitcoin was _specifically_ designed to avoid regulated transactions, i.e., to foster money laundering. Banks dealing in it make a show of regulatory compliance with "anti-money-laundering" efforts, but the means around it are well documented on the Bitcoin wiki at https://en.bitcoin.it/wiki/Pri... [bitcoin.it] .
Re:They did a lot more than just make a mixer (Score:5, Insightful)
False. Bitcoin was _specifically_ designed to avoid the need for a regulation body in order to facilitate transactions. The way that was done was to implement a completely open and transparent ledger which enabled ANYONE to follow and validate the entire history of transactions. Doing so isn't some hack or discovery.
Laundering money is obscuring history, Bitcoin makes completely transparent and unobscured history a fundamental design feature. I'm well aware of how it works I've been a bitcoin advocate since before it hit dollar parity.
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False. Bitcoin was _specifically_ designed to avoid the need for a regulation body in order to facilitate transactions.
False. Bitcoin was _specifically_ designed so unregulated entities can transact. This in NO WAY avoids the need for a regulatory body to oversee financial transactions.
Transaction history is not a problem Bitcoin solves, because asking any regulated financial institution for transaction history is easy. You can literally pick up the phone and ask for a source of funds. What Bitcoin does do is provide a way around KYC rules, and that facilitates money laundering. Which is why there are KYC rules. Duh.
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"False. Bitcoin was _specifically_ designed ____________. The way that was done was to implement _____________."
If you are going to replace the first box then you need to be able to fill in the second.
Bitcoin was designed so ANY entities, unregulated or regulated can transact without dependence on third parties. I have value and want to give it to you, you want that value, bitcoin lets us transfer value and provides an audit trail which proves both that I had the value and you are the one who has it now wit
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Bitcoin is neutral like most tools. It is built to resist attempts to destroy it but beyond that isn't made to foil regulators or enforcement.
Even if it were made for such a purpose I think what most people forget in this equation is that the world worked just fine before KYC and anti-money laundering measures. Those measures haven't brought any sort of widespread public good, people have given up their privacy and some theoretical amount of crime is prevented but the system worked just fine before that wit
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Re: They did a lot more than just make a mixer (Score:2)
It takes a lot of hard work and a good bit of luck to trace transactions back.
Money Laundering is a Catch-all Fake Crime (Score:2)
If you try hard enough, you can trace any given dollar to a crime.
Oh look, your GPS says you sped on your way to work every day, that means your paycheck was the proceeds of a crime. Money laundering. Why do they never charge big corporations with money laundering when they engage in false advertising or fraud? It is typically just unpopular people doing unpopular things. Great propaganda tool.
All the government has to do is say the magic words, money laundering, and your money is theirs.
What is shocking
Re: They did a lot more than just make a mixer (Score:2)
No, it was supposed to be public. You can do stuff anonymous as long as you donâ(TM)t link any government tracked systems (banking, shipping, addresses etc) to your wallet(s).
Mixing is supposed to obscure the transfer of funds and becomes a bridge between your anonymous financial transactions and the ones you want to do government-tracked transactions with.
Re:They did a lot more than just make a mixer (Score:4, Interesting)
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"thing is, no one's really using BTC by itself and prefer to launder/evade taxes etc"
BS
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There's many reasons to want to not have long paper trails of everything we do. Doesn't mean we're bad people or criminals.
Your Honor and members of the jury.
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These are all legitimate uses and there are many more like international payments, travel money, paying people who are trying to get off the welfare treadmill, and just normal transactions.
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If you're "privacy oriented", the absolutely positively last thing you would be using is Bitcoin, since it's transaction are entirely wide-open and public by design. If you want your transactions to be as public as possible, you use Bitcoin.
Re:They did a lot more than just make a mixer (Score:5, Informative)
No. Bitcoin has NEVER been anonymous. It's been traceable by design AND in practice: https://www.coindesk.com/marke... [coindesk.com]
Monero is the one that's supposed to be anonymous. That's the one where it's actually news if it's not anonymous.
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^ THIS
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No, bitcoin was designed to be innately tracable. In that every transaction could be traced and wallet identified from start to finish. The wallets themselves are essentially like numbered accounts, your privacy is dependent on you keeping your account number private.
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The government can map the entire blockchain history and identify every single transaction, and identify anyone who ever bought or sold bitcoin using their credit or debit card. You can then use that to see where all the bitcoin flowed to and that should identify the most active traders.
Use AI to focus on the exchanges and look at ingress and egress only, group the transactions by card holder and country, so you can easily separate the whales who just pump around their crypto, from the drug dealers who rece
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"The government can map the entire blockchain history and identify every single transaction"
Anyone can, by design.
"identify anyone who ever bought or sold bitcoin using their credit or debit card"
That has nothing to do with bitcoin. Anonymity is not a design characteristic of Bitcoin, it never was. Bitcoin was designed for decentralized economy detached from any central body or nation not for illegal activity.
"Use AI to focus on the exchanges and look at ingress and egress only, group the transactions by ca
Re: They did a lot more than just make a mixer (Score:2)
"Bitcoin was designed for decentralized economy detached from any central body or nation"
As it turns out there is very little demand for economy detached from nations. If the bulk of bitcoins are being exchanged to/from government currencies, it's not detached. And indeed, that's the point at which people get associated with wallets.
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"As it turns out there is very little demand for economy detached from nations."
Citation Needed. I might readily exchange dollars and BTC at the moment because dollars exist and it is convenient to do so. In relative scale BTC is also still tiny but that isn't saying much as the USD drives the global economy. But if the USD collapsed tomorrow and stopped being convenient I wouldn't drop utilizing BTC; quite the opposite. If all state backed currencies collapsed tomorrow it wouldn't follow that the BTC econo
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if the USD collapsed tomorrow
which is not how anything works
If all state backed currencies collapsed tomorrow
which is double-triple-extra not how anything works
You're making plans for a future that, if it comes, will be accompanied by such devastation that no one will give two shits about your strings of numbers. They will be trading ammunition and bandages.
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"which is not how anything works"
There are a number of things you could mean by this but they are all pretty much wrong.
You are essentially arguing that there is no demand for plain water because everyone using it is making tea out of it. I'm pointing out that the demand is really for water and they are only making tea at the moment because tea is at hand. They'd continue drinking the water if the tea wasn't at hand because the demand is for the tea. I'm also pointing out water doesn't actually care how pop
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Crypto gives a system which is already in place and either still works or can quickly be made to work in a world where we still need money but don't trust anybody with the power that would come with controlling the new money.
If things get so bad that you can't use the most stable fiat currencies on the planet, you're not going to have the internet there so that the blockchain can get updated.
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"If things get so bad that you can't use the most stable fiat currencies on the planet, you're not going to have the internet there so that the blockchain can get updated."
Why? Do you imagine the fiber is going to sense the weak dollar and poof into the ether? Or the workers who suddenly find themselves in the desperate economy aren't going to bother showing up for work? Even if it did you can bring back 'the internet' with a handful of ham radios doing packet radio. You are predicting a level of total coll
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It was designed to be verifiable, without a regulatory agency involved.
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Fine. It was designed to be verifiable without need for a regulatory agency, To accomplish that the design ensured "that every transaction could be traced and wallet identified from start to finish. The wallets themselves are essentially like numbered accounts, your privacy is dependent on you keeping your account number private."
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Another note here, while bitcoin was designed to operate independently without need of central bodies such as states and banks it was NOT designed with foiling or evading those entities in mind. Everyone just projects the latter from the former and the fact some people decided to use it for black market trading.
Re:They did a lot more than just make a mixer (Score:4, Insightful)
The proper term is pseudonymous. A bitcoin wallet is a fully open and visible purchase profile, just one not associated with a name. Once you buy something that can be traced back to you once, literally everything you've ever bought with it can be traced back to you, all public and datestamped. If you ransomware someone, and they transfer bitcoins to the ransomware wallet, it doesn't matter how many wallets you try to launder them through, there's a direct visible path to see where they go - just not associated with a name. Until you try to do something tied to the real world with any money in any of the wallets, wherein, you're unmasked.
These tools are designed to "fix this problem" by letting many people pay bitcoin into wallets and randomly shuffling the coins around, so you get someone else's coins and they get yours, at random - so you gain the defense that whatever crimes the coins in your wallet may or may not have been part of, you weren't involved in it. Developers of such tools try to present themselves as privacy heroes - people can use them to stop people from finding out their salary, or their rent, or things of that nature. But the reality is that like 99% of the usage of such systems is for crime, and they damned well know it. "It COULD be used for legitimate purposes" - like the dumb kitchen knife analogy - is the Napster defense, and it doesn't fly.
Re: They did a lot more than just make a mixer (Score:2)
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It was never anonymous. In fact its most prominent feature was its traceability and public ledger. It was as if someone invented "Bank accounts where you can read everyone elses transactions" aaaand then smoothbrains decided that must be therefore anonymous.
Cops have been tracing bitcoin wallets for a good decade now.
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They're facing indictment because they were being stupid.
It's funny how often it boils down to that in the many, many stories we've seen involving crypto-bros.
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So what? That is just what the government is going to use to 'nail' them in court, it doesn't make anything they did wrong. The government isn't going after them for doing anything wrong and further grey and black markets are essential elements in a free society.
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No, it does not. I said wrong not unlawful. Plenty of lawful things are wrong and unlawful things are right. Facilitating freedom which isn't subject to the changing whims of the tyrannical state is fundamentally right.
Black markets are every bit as essential as anonymous free speech. If freedom only exists when it happens to align or be neutral to the agenda and will of the state then it isn't freedom at all.
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A tyrannical state can make anyone a criminal for any activity.
Harriet Tubman's underground railroad was a criminal enterprise and not everyone who participated did so for free, which is understandable because there was great risk involved and a need for people to feed their families. All trade in relation to that constitutes black market activity.
By your rationale everyone who participated in the underground railroad, spread knowledge about it, or participated in trade that made it possible did wrong. What
Re: They did a lot more than just make a mixer (Score:1)
You never lived in a real-world authoritarian state, leave alone dictatorship, didn't you?
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Ahhh... a true Scotsman fallacy. People are talking about a system offering having basic financial privacy so the state can force their will on them more effectively being guilty of high crimes and deserving severe punishment. When thwarting basic monitoring and control mechanisms of the state is a high crime/felony that IS authoritarianism. We are already there.
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Actually we are talking about people fighting a broken system AND piece of shit drug dealers, thieves, etc where etc is literally everyone else. This is just the tired old and thoroughly debunked 'if you don't have anything to hide, why not let them look' argument.
When thwarting basic monitoring and control mechanisms of the state, systems which bypass due process, is a high crime/felony you have authoritarianism. This is worse by definition than a limited amount of drug dealing, thievery, small scale murde
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I think conspiracy to commit laundering is a step too far.
Why? If you are making a product that helps someone commit money laundering and then actively advertise it as great for money laundering in what way are you not conspiring to commit money laundering? It would be entirely different if they were selling this as a pure privacy tool but the moment you start deliberately advertising it for illegal uses you are conspiring with your customers to commit a crime.
The examples you give are all state actors and in ths world states are not held to the same laws as i
Difficult to trace / track (Score:2)
That's the only reason the Justice Department has any interest in it.
( Those who believe crypto is anonymous are in for a big surprise )
It is the same reason Monero isn't carried by the big crypto-currency exchanges.
It's one of the few that are quite difficult ( have they discovered a method yet ? ) to trace.
This makes Monero illegal? (Score:1)
So, spending a currency anonymously by tumbling or by using Zcash or XMR money laundering? What about paying someone with physical USD? This is a worrisome precedent.
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You'll have to resort to washed coins to remove DNA and avoid serial numbers.
Sorta Meh (Score:3)
1) There's nothing wrong with being a privacy nut and not wanting your spending tracked in a public ledger. Hiding your transaction history is only a crime if you're doing it to cover up a crime. Otherwise, every time I've made change for somebody and then used their cash to buy something, I've been asking for a prison sentence somehow.
2) These guys took something innocent and made it criminal when they started telling people, "hey, this perfectly innocent tool we made is great for hiding your crimes!"
I'm left with not really caring if they rot.
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"Hey, got $20 bills from illegal transactions? Come to my store and buy a candy bar and I'll give you change in smaller bills and coins that I got from my bank or other customers! No questions asked [except "is it counterfeit" of course :)]!"
Nevermind that the candy bars I sell are way over-priced. A guy's gotta make money somehow, right?
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So what? Black and grey markets sometimes enable bad things, mostly they just enable freedom from absolute tyranny.
Just ask the T's in LGBT how long they depended on black markets or people who can't afford properly vetted insulin but can afford the same thing made cheaply in a chinese lab or these days people who actually need pain medication. In Mexico they've outlawed real pain medication... do you think people don't take it? Of course they do, they buy it on the black market.
Using a black market carries
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Otherwise, every time I've made change for somebody and then used their cash to buy something, I've been asking for a prison sentence somehow.
That depends on the amount.
Make change for a $10 bill? Legal.
An anonymous cash transaction for $10,000? Crime.
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An anonymous cash transaction for $10,000? Crime.
No it's not, but nice try.
uh no (Score:3)
"selling someone a kitchen knife isn't a crime"
I mean, it is if you make the knife to commit crimes with, and then sell that knife by advertising it as, "the best knife to commit crimes with."
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I mean, it is if you make the knife to commit crimes with, and then sell that knife by advertising it as, "the best knife to commit crimes with."
This! There are actually certain knife designs which are specifically illegal to make / sell, even in some US states. Where I live a kitchen knife is perfectly legal (it does after all have uses in the kitchen and isn't a primary tool for simply ending some mother******. On the other hand stilettos are illegal having a singular purpose of being a stabbing dagger for killing and being utterly useless as a knife for any other purpose.
Pretty obvious what is needed here (Score:4, Insightful)
We need completely autonomous and decentralized open mixing protocols that can't be shut down, much like bitcoin itself cannot.
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Exactly, it's so cringe for individuals to be able to spend money without big daddy. All hail the government. Nothing outside the government, nothing against the government!
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Being "autonomous and decentralized" would immediately become "embezzled by its administrators",. This is what happened with "Silk Road" and numerous other exchanges which attempted to launder Bitcoin.
Re:Pretty obvious what is needed here (Score:5, Informative)
If it has administrators it isn't autonomous and decentralized. Silk Road was neither autonomous nor decentralized.
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Nor were they honest. Why is anyone surprised by a Bitcoin company lying to its clients?
Re: Pretty obvious what is needed here (Score:1)
Given how much electricity and computing you need to facilitate Bitcoin transactions, just a few governments could put a stop to Bitcoin by outlawing large-scale mining. This isn't something you can do in your basement anymore.
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much like bitcoin itself cannot.
Bitcoin can easily be shutdown. All it would take is for the bitcoin exchanges to be made illegal in the US and propose sanctions on countries hosting them. At that point the value evaporates and the cost of the electricity needed to merely maintain your bitcoin exceeds the value of bitcoin itself.
The only people in it for the "liberty" are criminals and the naive.
This is a very good opportunity... (Score:2)
Now is a great time to pick up or utilize some of your BTC to make profits market making with coinjoin.
Incapable to get the name right (Score:5, Informative)
It's Samourai [wikipedia.org], as in military nobility in feudal Japan, not Samouri [blizzard.com], as in Goblin Blood Death Knight.
No more cash? (Score:1)
Sooo.... basically everyone accepting cash should be indicted as well since doing so anonymises where I spend my cash.
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More like, you have a $1000 dollars and you ask some shady dude to replace it with $1000 of fresh notes, keep $100 for himself and give the remaining $900 to somebody else (or possibly back to you). People with sense would recognize that as money laundering.
So basically just a tumbler (Score:2)
They might call it a whirlpool but it's just a bitcoin tumbler hidden behind another protocol - something that takes in one person's dirty coin, throws it into a wallet, fragments the lot through a bunch of fake transactions into other wallets, maybe throws in some air gaps to break the chain and hands the rest out to some other wallet which could also be under the control of the person who initiated the transaction. For a fee of course. A basic money laundering setup and obviously used as such.
Although I w
fraud all the way down (Score:1)
Money is a creation and property of governments for the purpose of making tax collection easy; beats exchanging flocks of sheep. That property of money has been true since the Assyrians and remains true now. And money , a government creation, must be distinguished from value, which is created by individuals.
Of-course the nominal money-generating
"Conspiring to" (Score:1)