Blockchain programmer Michael Lewellen has filed a complaint against the U.S. Department of Justice, alleging that it is degrading crypto development by giving an extremely broad definition of governmental money-transmission laws.
Filed Thursday, the petition seeks to avoid prosecution of his distributed fundraising system, Pharos, which he argues operates outside the context of these restrictions.
Pharos, built on Ethereum, uses “assurance deals”, which employ smart deals to maintain money and immediately payment donors if funding goals are unfulfilled.
The petition describes the system as non-custodial, meaning Lewellen neither holds nor controls consumer money.
Lewellen contends that the DOJ’s interpretation of 18 U. S. C. §1960 ( Prohibition of illegal money transmitting businesses ) improperly classifies non-custodial software developers as unlicensed money transmitters.
The DOJ’s stance “betray ]s ] its own representations to the public by criminally prosecuting people who publish non-custodial cryptocurrency software”, reads the lawsuit.
The filing states that” the laws against unlicensed money transmission are intended to regulate intermediaries in the sensitive business of moving customers ‘ money, not technologists who develop tools that allow users to move money themselves.”
Neither Lewellen nor the DOJ has responded to Decrypt’s request for comment.
The ability to create easily is threatened by the DOJ’s large view of money transmission laws, Lewellen tweeted. This isn’t just about Pharos, it’s about the prospect of crypto technology in America.”
The lawsuit raises questions about legal issues, noting that the DOJ’s actions violate the First Amendment by outlawing the release of program code and the Fifth Amendment by enforcing legislation in a obscure and random fashion.
The case may be inherited as Attorney General Merrick Garland prepares to resign from his position. Senate confirmation hearing was held on Wednesday for past Florida Attorney General Pam Bondi, the approaching Attorney General.
Cases in Storm and Rodriguez are crucial to legitimate debate
The lawsuit makes reference to the well-known cases of Samourai Wallet co-founders Keonne Rodriguez and William Lonergan Hill as proof of a disturbing rise of national expert over non-custodial blockchain tools.
Along with Roman Semenov, Storm and others were charged in 2023 with running Tornado Cash, a crypto mixer accused of facilitating money laundering and breaking sanctions.
Storm was detained and is currently facing a New York court case while Semenov is still being held.
In April 2024, federal authorities arrested Rodriguez and Hill, alleging their non-custodial Bitcoin wallet platform, Samourai Wallet, served as a tool for illegal transactions.
Prosecutors claim the wallet facilitated more than$ 2 billion in suspect transfers, with more than$ 100 million being connected to illegal online retailers.
Lewellen’s lawsuit expands on these examples, suggesting that such prosecutions should criminalize the creation of privacy-preserving tools as opposed to those who are directly involved in illegal activity.
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