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This morning, a letter filed by the defense of Samourai Wallet developers Keonne Rodriguez and William Lonergan Hill revealed that<\/a> the Southern District of New York (SDNY) had suppressed exculpatory evidence in the criminal case.\u00a0<\/p>\n According to the filing, the prosecution had consulted FinCEN prior to the indictment of the developers on the viability of bringing unlicensed money transmission charges against a non-custodial service.<\/p>\n \u201cA mixer like Samourai that does not take custody of the cryptocurrency by possessing the private keys would strongly suggest that Samourai is not acting as an MSB,\u201d FinCEN told the prosecutors, according to the filing.<\/p>\n In internal communications, prosecutors stated that they may bring charges based on the \u201cfunctional control\u201d of the code, likely referring to Samourai\u2019s control over the user interface and Samourai Wallet\u2019s coinjoin server. The prosecution stated that such an argument \u201chas never been addressed in the guidance,\u201d acknowledging that \u201cit could be a difficult argument to make.\u201d<\/p>\n The communications between FinCEN and SDNY were revealed following a so-called Brady request, ordering the government to hand over any evidence that may exonerate the developers of the charges.\u00a0<\/p>\n The government is required to hand exculpatory evidence over to the defense two weeks after filing its indictment at the latest. The late disclosure of such highly relevant materials may now have misled the court, the letter alleges, affecting both the bail requirements placed on the developers as well as the judge\u2019s inclination to deny the filing of a motion to dismiss.<\/p>\n The defense is now seeking a hearing to determine potential remedies to SDNY\u2019s conduct, including the dismissal of charges.<\/p>\n \u201cIt is hard to imagine a clearer example of \u2018regulation by prosecution\u2019 than what we have here,\u201d the defense states, referring to the recent Blache memo<\/a>. \u201cThe relevant regulator telling the prosecutors that Samourai Wallet was not a money transmitter \u2013 under the same public guidance that Mr. Rodriguez and Mr. Hill relied on to guide their conduct \u2013 and the prosecutors going ahead and indicting them for operating an unlicensed money services business anyway.\u201d<\/p>\n FinCEN\u2019s stance on non-custodial service providers shared with SDNY echoes its 2019 guidance<\/a>, which stated that \u201ca cryptocurrency wallet provider is to be classified as a money transmitter if \u201cthe host has total independent control over the value (although it is contractually obligated to access the value only on instructions from the owner).\u201d<\/p>\n Advocacy groups and legal scholars alike have long argued<\/a> that the prosecution of Samourai Wallet developers, as well as the prosecution of Tornado Cash developers Roman Storm and Roman Semenov, constitute a clear violation of FinCEN guidance.<\/p>\n While Samourai\u2019s Brady request was successful, a similar request<\/a> made by Tornado Cash developer Roman Storm attempting to compel the Government to disclose \u201cany materials received from OFAC and FinCEN not already produced, including any substantive communications with those agencies\u201d was denied last year, as the Government argued that FinCEN is not part of the prosecution team on the case.<\/p>\n