Samourai Wallet’s lawyers allege federal prosecutors suppressed advice that the firm didn’t need a license before they charged executives at the crypto mixing service months later. 

In a May 5 letter to a Manhattan federal court, lawyers for Samourai co-founders Keonne Rodriguez and William Hill said prosecutors disclosed that the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) representatives told them six months before they charged the pair “that under FinCEN’s guidance, the Samourai Wallet app would not qualify as a ‘Money Services Business’ requiring a FinCEN license.”

“Shockingly, six months later, the same prosecutors criminally charged Keonne Rodriguez and William Hill with operating just such a business without a FinCEN license,” the lawyers added.

The letter claimed that prosecutors were required to share their discussions with FinCEN over Samourai two weeks after they unsealed charges, making the deadline May 8 last year, but instead “suppressed this information for over a year, disclosing it only on April 1, 2025.” 

Prosecutors charged Samourai CEO Rodriguez and its technology chief Hill with conspiracy to operate an unlicensed money transmitting business and money laundering conspiracy in February 2024, unsealing the charges and arresting the pair in April that year. 

Samourai’s mixing service took crypto from multiple users and blended it together to hide its origins. The government alleged the platform helped with over $2 billion in illegal transactions and facilitated over $100 million worth of money laundering transactions from online black markets and scammers.

Rodriguez and Hill both pleaded not guilty.

In the letter, their lawyers said prosecutors shared details of a call with Kevin O’Connor, chief of FinCEN’s Virtual Assets and Emerging Technology Section in the Enforcement and Compliance Division, and Policy Division staffer Lorena Valente.

According to an email from one of the prosecutors summarizing the call, FinCEN said that “because Samourai does not take ‘custody’ of the cryptocurrency by possessing the private keys to any addresses where the cryptocurrency is stored, that would strongly suggest that Samourai is NOT acting as an MSB [money services business].”

An excerpt of an email from prosecutor Andrew Chan said FinCEN “did not have a sense” of what it would decide on Samourai. Source: CourtListener

The email said O’Connor and Valente agreed that the government could try to argue that Samourai functionally controlled the crypto, “but that has never been addressed in the guidance, and so it could be a difficult argument” for prosecutors.

Samourai’s lawyers asked the court for a hearing “to determine the circumstances surrounding the Government’s late disclosure” and to administer a remedy.

Samourai to renew dismissal bid if case goes on

Rodriguez and Hill’s lawyers said that, using this latest information, they would again ask for the charges to be dismissed, arguing they lacked fair notice and “understood they were acting lawfully.”

Related: US Treasury’s OFAC can’t restore Tornado Cash sanctions, judge rules 

Prosecutors and Samourai asked the court for more time on April 28 to consider potentially dismissing the case after the Justice Department rolled back its crypto enforcement.

Rodriguez and Hill bid to dismiss the case in early April, arguing it should be dropped as Deputy Attorney General Todd Blanche said in an April 7 memo that the Justice Department wouldn’t prosecute crypto mixers for “unwitting violations of regulations.” 

In the latest letter, their lawyers said if the government “were to resist the Blanche Memo’s directive and push forward,” then they would bid to dismiss as “if they were not money transmitters under FinCEN’s guidance, then they could not possibly be prosecuted for not having a license.”

Magazine: Tornado Cash 2.0 — The race to build safe and legal coin mixers 

ChatGPT-maker OpenAI has abandoned plans to become a for-profit company and reaffirmed commitment to its nonprofit status. 

In a May 5 blog post, OpenAI confirmed plans to convert its for-profit business unit into a so-called Public Benefit Corporation (PBC), which would remain under the nonprofit’s control. PBCs are for-profit companies that are legally obligated to prioritize a social mission alongside the interests of shareholders.

The plans mark a reversal for OpenAI, which had previously floated a for-profit conversion involving spinning out the nonprofit entity.

“OpenAI was founded as a nonprofit, and is today overseen and controlled by that nonprofit. Going forward, it will continue to be overseen and controlled by that nonprofit,” the ChatGPT-maker said. 

This can be done without compromising OpenAI’s ability to raise funds for AI development, which “currently requires hundreds of billions of dollars and may eventually require trillions of dollars,” OpenAI’s CEO, Sam Altman, said in a letter to employees announcing the decision.

In 2024, OpenAI took a starkly different view, asserting that the for-profit entity was “necessary” for raising capital to amass the “vast quantities of compute” needed to run AI models. 

OpenAI’s May 5 governance announcement. Source: OpenAI

Related: OpenAI expects to 3X revenue in 2025 but Chinese AI firms are heating up

Controversial Plans 

OpenAI was originally founded as a nonprofit in 2015, and in 2019 it created a for-profit entity purportedly to help AI developers raise funds. The for-profit unit has remained under the nonprofit’s control since then. 

In 2024, Tesla CEO Elon Musk — one of OpenAI’s cofounders — sued Altman for allegedly “violating terms of Musk’s foundational contributions to the charity,” according to a November court filing. 

In the lawsuit, Musk alleges Altman “assiduously manipulated Musk into co-founding their spurious nonprofit venture, OpenAI,” while secretly planning to convert OpenAI to a for-profit entity. 

Musk has since launched xAI, the developer of AI chatbot Grok, which he said has fallen victim to OpenAI’s allegedly anti-competitive practices.

OpenAI’s leadership expects its revenue to hit $29.4 billion by 2026, Bloomberg reported in March. It forecasts earning revenues of $12.7 billion in 2025.

In March, OpenAI raised $40 billion from Softbank at a $300 billion valuation.

Magazine: Bitcoin to $1M ‘by 2029,’ CIA tips its hat to Bitcoin: Hodler’s Digest, April 27 – May 3

Acting US Attorney for the Eastern District of New York (EDNY) John Durham has departed as President Donald Trump’s pick takes control of the office.

In a May 5 notice, the US Attorney’s Office for EDNY said Joseph Nocella will serve as interim US Attorney for the region for 120 days or until a Senate-confirmed nominee assumes the role. Nocella’s appointment came as jury selection began in the criminal trial of Braden John Karony, the former CEO of crypto firm SafeMoon.

It’s unclear how the advancement of Nocella, appointed by US President Donald Trump this month, could affect prosecutors’ case against Karony, who faces charges of securities fraud conspiracy, wire fraud conspiracy, and money laundering conspiracy. Nocella said he intended to help prosecute “narcotics-traffickers, gang members, terrorists, human-traffickers and other criminals.”

The former SafeMoon CEO asked the court in February to consider pushing back the start of the trial based on “significant changes” Trump had proposed affecting US securities laws, potentially impacting his criminal case.

Related: What do crypto users want to happen to Alex Mashinsky?

Though not as well known for criminal cases involving high-profile figures in the crypto industry, the Eastern District of New York has been responsible for overseeing cases against individuals tied to digital assets, including a Securities and Exchange Commission (SEC) complaint against Hex founder Richard Heart and fraudsters.

Its neighboring district, the Southern District of New York, will oversee the sentencing of former Celsius CEO Alex Mashinsky on May 8. Jay Clayton, a Wall Street insider and the former chair of the SEC, became the interim US Attorney for the district in April.

Criminal trial to start on May 6

SafeMoon’s Karony, Kyle Nagy, and Thomas Smith were charged in November 2023 for “diverted and misappropriated millions of dollars’ worth” of the platform’s SFM token between 2021 and 2022. Karony has pleaded not guilty to all charges and has been free on a $3 million bond since February 2024.

In a May 5 filing, Karony agreed to have jury selection for his trial proceed under US Magistrate Judge James Cho. District Judge Eric Komitee is expected to oversee the trial starting on May 6.

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