April 2024 proved to be an exceptional month for crypto regulation, as U.S. agencies seized a popular crypto app and criminally charged its founders while notifying two other companies of possible civil cases.
Samourai Wallet
The U.S. Department of Justice (DOJ) took down the website and Android app listing for Samourai Wallet, a popular Bitcoin wallet, on April 24.
The DOJ said that Samourai’s mixing feature and other privacy tools supported money laundering activity connected to illegal transactions.
The DOJ additionally filed criminal charges against Samourai’s operators, Keonne Rodriguez and William Lonergan. The two operators allegedly facilitated $2 billion in unlawful transactions and laundered more than $100 million in criminal proceeds, earning millions of dollars in the process.
The two individuals now face various criminal charges in the United States. Both have been arrested, with one facing extradition from Portugal.
Despite its alleged connection to criminal activity, Samourai is one of the oldest Bitcoin wallets. It was popular among users: the mobile version of the app saw over 100,000 downloads before the government seizure.
Uniswap
On April 10, the U.S. Securities and Exchange Commission (SEC) informed Uniswap Labs of potential legal action by sending a Wells notice to the company.
Uniswap Labs stated that it will continue to offer services until the SEC takes action and said it intends to fight the SEC in court if necessary.
Uniswap advanced several arguments, asserting that it does not operate a securities exchange or broker under the legal definition, that its UNI token is not a security, and that the SEC does not have Congressional authority over non-securities.
The case currently does not have any criminal implications. The SEC can file civil charges, which may include fines, penalties, and injunctions. Furthermore, the SEC has not yet filed a case — merely warned of one.
Uniswap is among the most popular decentralized finance (DeFi) services. It offers a decentralized exchange (DEX), a wallet, and liquidity pool-based earning. Uniswap Labs called itself the “largest use case” for Ethereum, as it occupies 25% of Ethereum’s blockspace and has processed $2 trillion of funds.
Metamask and Consensys
On April 25, Consensys said that it previously received a Wells notice from the SEC and attended a related phone conference.
The SEC told Consensys that it may take legal action against two products tied to its Metamask wallet, specifically its “swaps” and “staking” products.
As with Uniswap, the SEC can only launch a civil against case Consensys, and there is no sign that other agencies will launch a criminal case.
However, unlike Uniswap, Consensys has taken preemptive action. Consensys has sued the SEC, arguing that the agency has no jurisdiction over Ethereum (ETH) as a non-security asset, that the SEC does not have authority over internet developments, and that applications that allow crypto trading are not securities brokers. Consensys aims to have the court affirm those points.
Though Consensys seeks a declaration that would specifically protect it against SEC action, the company also aims to protect the Ethereum ecosystem broadly.
Metamask is one of the most popular Ethereum wallets. It reported 30 million monthly active users (MAUs) in January 2024.
More Cases Expected
U.S. agencies will undoubtedly pursue more cases in the future, as they have undertaken numerous crypto cases in the past.
However, each of the current cases represents a particular area of interest.
For the SEC, the Uniswap and Consensys cases could determine the viability of Ethereum-related securities cases. Earlier reports from Fortune suggested that the SEC has subpoenaed a number of companies in relation to a probe of the Ethereum Foundation. Critically, the SEC’s growing scrutiny follows Ethereum’s shift to proof-of-stake, which modified governance and validator profit structures.
For the DOJ, the Samourai case represents continued action against mixing services that obscure the movement of funds and sometimes aid criminal activity.
Though the DOJ has taken action against other mixers, the Samourai case represents a case against a particularly high-profile app. The FBI published a public crypto anti-money laundering warning shortly after the DOJ charges, which implies authorities are increasingly concerned with apps aimed at general users.
