A recent court filing in the Samourai Wallet case highlights a significant issue concerning trust between software developers and federal regulatory guidance. This situation poses a potential threat to American innovation.
According to a defense filing on May 5, prosecutors in the Southern District of New York charged two developers with operating an unlicensed money transmission business. They did so despite being aware that FinCEN, the relevant regulator, did not consider the software they built as constituting money transmission.
The filing includes a memo where prosecutors summarized FinCEN's stance: “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 (emphasis in the original) acting as an MSB.” This memo was written before the indictment but was withheld from both the defense and public for over a year. The case proceeded regardless.
This is not an isolated incident. In Roman Storm's prosecution, one of Tornado Cash's developers faced similar charges despite never holding custody of user funds. Other inappropriate investigations against developers in this space have been noted. Even if these investigations are dropped, there is nothing currently preventing DOJ from restarting them, continuing what some describe as an "illegal war against devs." Prosecutors have shown disregard for longstanding 2019 FinCEN guidance stating that software developers who don’t take custody of funds are not considered money transmitters under federal law. Coin Center has consistently supported this guidance and expressed frustration at its disregard by prosecutors.
This issue extends beyond legal missteps; it represents a violation of basic fairness and serves as a warning to those building or publishing general-purpose tools online. When agencies responsible for interpreting laws are ignored or contradicted by prosecutors, developers find themselves without safe harbor.
Deputy Attorney General Todd Blanche issued a memo last month calling for an end to “Regulation by Prosecution,” which was seen as encouraging but insufficient. If SDNY can ignore clear statements from FinCEN, they might also dismiss or equivocate over Blanche’s memo. The solution lies in legal reform.
Two paths forward exist: through courts or legislation. In Lewellen v. Garland—a lawsuit supported by Coin Center—Michael Lewellen seeks judicial clarification that publishing non-custodial tools does not equate to being a financial institution or entail criminal liability under 18 U.S.C. § 1960. This case could establish boundaries clarifying statutes meant for custodial money transmitters should not apply to software development.
Alternatively, legislative action through bills like the Blockchain Regulatory Certainty Act offers another route. This bipartisan bill would codify existing FinCEN guidance from 2019 regarding non-custodial software publication not constituting money transmission—preventing prosecutorial disregard rather than altering laws themselves.
Until either reform becomes law, U.S.-based developers face uncertainty about whether current guidance may become tomorrow’s legal trap—a scenario detrimental to building secure infrastructure while protecting civil liberties essential for maintaining America’s status as an innovation leader globally.
