SDNY Petitions Court To Deny Samourai Wallet Hearing Seeking Remedy For Withheld Evidence
Because FinCEN just gave their opinion, bro
On Monday, a filing revealed that FinCEN had explicitly told the Samourai Wallet prosecution that the developers did likely not need a money service business license due to the non-custodial design of their service.
The statements were made prior to the indictment of the developers, stating that registration requirements for non-custodial wallets had previously not been addressed by the regulator.
Despite acknowledging that their argumentation was "difficult to make," the Southern District of New York went ahead with its prosecution anyway, failing to disclose FinCEN's assessment of whether Samourai Wallet developers had broken the law for close to a year.
Samourai Wallet requested a hearing to discuss potential remedies to SDNY's conduct – including the dismissal of charges.
No Basis For A Hearing
According to the prosecution, "there is no basis for a hearing, nor is there anything to remedy," arguing that "the disclosure itself shows that the Government has not violated Brady" – a procedure in which the Government is required to hand over all exculpatory evidence two weeks after the indictment at the latest.
The reason that SDNY did not violate Brady, the prosecution argues, is that "the individual employees of FinCEN were not speaking on behalf of FinCEN, they were not providing FinCEN’s opinion, and they did not have a sense of what FinCen would decide if this question were presented to their FinCen policy committee.”
According to the prosecutors, FinCEN's assessment of the charges against Samourai Wallet were merely "informal, individual opinion expressed by two FinCEN employees during a phone conversation regarding whether those employees believed that Samourai needed to register as a money transmitting business under FinCEN’s regulations and public guidance."
That the Government even decided to disclose such "informal, individual opinions," according to the prosecutors, "demonstrate its complete commitment to meeting its disclosure obligations, beyond the strict requirements of Brady v. Maryland," because "courts have repeatedly held that these types of legal opinions—or opinions of any kind—are not Brady material," not facts.
"As the two FinCEN employees emphasized in their call with members of the prosecution team," SDNY writes, "they could not speak for how FinCEN would ultimately decide whether Samourai would be classified as a money transmitting business."
Furthermore, the prosecution claims that FinCEN guidance "are not regulations or rules and have no authoritative effect," especially since SCOTUS' overturning of the Chevron defense, which required courts to defer to agency interpretations of the law.
"There is no need for court intervention when the defendants have received
discovery materials sufficiently in advance of trial to effectively use the information," SDNY argues.
As the advocacy group CoinCenter recently pointed out, "when the agencies charged with interpreting the law speak, and yet their views are ignored or buried by prosecutors pursuing a contradictory theory, developers have no safe harbor."
Meanwhile courts in other jurisdictions are dropping cases where the law on money service business registration requirements has been unclear following the Blanche memo.
The Disclosure Has No Bearing On The Core Conduct
"The driving force of the charges against the defendants is their willful participation in a scheme to commit money laundering and to profit from that criminal business," argues SDNY further, citing Samourai Wallet marketing material and communications.
Specifically, SDNY is referring to instances where Samourai Wallet developer Keonne Rodriguez retweeted posts made by Samourai Wallet users encouraging hackers to launder funds through the service, deciding to offer a 20% discount on Whirlpool fees due to the hacking incident.
Prosecutors further highlight that Rodriguez had told an associate in a WhatsApp chat that Samourai Wallet did "money laundering for bitcoin."
As SDNY aims to show at trial, the defendants carried out "a large-scale, multi-year money laundering conspiracy," laundering "over $100 million dollars of crime proceeds."
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