Blockchain developer Michael Lewellen has filed a lawsuit in opposition to the U.S. Division of Justice, accusing the company of criminalizing crypto growth by an excessively broad interpretation of federal money-transmission legal guidelines.
Filed Thursday, the lawsuit seeks to stop prosecution of his decentralized crowdfunding platform, Pharos, which he argues operates outdoors the scope of those rules.
Pharos, constructed on Ethereum, makes use of “assurance contracts,” which make use of good contracts to carry funds and mechanically refund donors if funding objectives are unmet.
The lawsuit describes the platform as non-custodial, which means Lewellen neither holds nor controls person funds.
Lewellen contends that the DOJ’s interpretation of 18 U.S.C. §1960 (Prohibition of unlawful cash transmitting companies) improperly classifies non-custodial software program builders as unlicensed cash transmitters.
The DOJ’s stance “betray[s] its personal representations to the general public by criminally prosecuting individuals who publish non-custodial cryptocurrency software program,” reads the lawsuit.
“The legal guidelines in opposition to unlicensed cash transmission search to control intermediaries within the delicate enterprise of transferring clients’ cash, not technologists who create instruments that enable customers to maneuver cash themselves,” the submitting states.
Neither Lewellen nor the DOJ has responded to Decrypt’s request for remark.
The DOJ’s broad interpretation of cash transmission legal guidelines threatens the power to construct freely,”Lewellen tweeted. “This isn’t nearly Pharos; it’s about the way forward for cryptocurrency innovation in America.”
The lawsuit factors to constitutional issues, noting that the DOJ’s actions violate the First Modification by criminalizing the publication of software program code, and the Fifth Modification by imposing legal guidelines in a obscure and arbitrary method.
As Legal professional Normal Merrick Garland prepares to depart his submit, his successor will inherit the case. The incoming Legal professional Normal, former Florida Legal professional Normal Pam Bondi underwent a Senate affirmation listening to on Wednesday.
Storm and Rodriguez Instances Central to Authorized Argument
The lawsuit references the high-profile circumstances of Twister Money developer Roman Storm and Samourai Pockets co-founders Keonne Rodriguez and William Lonergan Hill, as proof of a troubling growth of federal authority over non-custodial crypto instruments.
In 2023, Storm, together with Roman Semenov, confronted expenses associated to working Twister Money, a crypto mixer accused of facilitating cash laundering and violating sanctions legal guidelines.
Whereas Semenov stays out of custody, Storm was arrested and is being tried in New York.
In April 2024, federal authorities arrested Rodriguez and Hill, alleging their non-custodial Bitcoin pockets platform, Samourai Pockets, served as a device for unlawful transactions.
Prosecutors declare the pockets facilitated over $2 billion in suspect transfers, together with greater than $100 million tied to illicit marketplaces on the darkish net.
Lewellen’s lawsuit builds on these examples, suggesting that such prosecutions criminalize the event of privacy-preserving instruments slightly than focusing on these instantly engaged in unlawful actions.
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