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Districts Dropping Blanche Memo Cases, SDNY Still Won't Comply
| geometry of the afterlife | 05/08/25 |
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Date: May 8th, 2025 5:24 PM Author: geometry of the afterlife https://www.therage.co/districts-dropping-blanche-memo-cases-sdny-still-wont-comply/
A New Jersey District Court has dismissed unlicensed money transmission charges in response to last month's Blanche memo. It's not the only one.
A District Court in New Jersey has dismissed charges against Christopher James Scalon, a Utah resident who provided cryptocurrency services to clients.
"The Department of Justice’s recent April 7, 2025 policy memorandum, Ending Regulation by Prosecution, [...] reinforced that criminal prosecutions should be restrained where ambiguity exists, and especially where delay results in disproportionate prejudice," argued Scalon in reply to the Government's opposition to his previous motion to dismiss.
The charges against Scalon of conspiracy to operate an unlicensed money service business were dismissed by the court on April 30th.
Similarly, a court in Indiana dismissed charges against AurumXchange operator Maximiliano Pilipis in February, whose exchange had been used to transfer Silk Road funds.
Because FinCEN had issued no guidance on cryptocurrency services prior to 2013, Pilipis could not be held accountable for operating an unlicensed money service business, as the regulations he had been accused of violating had not yet existed, and the licensing laws in question had been ambiguous at the time, the court found. Samourai Wallet and Tornado Cash: Ambiguity At Best
As recently revealed, SDNY's unlicensed money transmission charges against both Samourai Wallet and Tornado Cash developers are ambiguous at best.
Scholars, advocacy groups, and think tanks alike have long argued that FinCEN's 2019 guidance on cryptocurrency services exempted services like Samourai Wallet and Tornado Cash from registering as money service businesses.
Previously suppressed evidence in the case against Samourai Wallet developers has now confirmed that FinCEN, too, has been under the impression that the design of services like Samourai Wallet exempts them from registration requirements.
"They acknowledged that we could make arguments about functional control of the cryptocurrency," likely referring to control over the user interface and servers, "but that has never been addressed in the guidance, and so it could be a difficult argument for us," prosecutors wrote in an email following conversations with the regulator.
The Southern District of New York has yet failed to drop its charges against both Samourai Wallet and Tornado Cash developers, despite the fact that prosecutors are effectively attempting to rewrite the law for non-custodial cryptocurrency services, holding individuals accountable for regulations that were unclear at best, and non-existent at worst.
The prosecutions are "a breakdown in the trust that software developers and innovators must be able to place in federal regulatory guidance," writes the advocacy group CoinCenter. "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."
"This is more than a legal misstep. It’s a violation of basic fairness," CoinCenter concludes.
Earning itself the title "Sovereign District of New York," the US' most prestigious prosecutors office has a history of defying main Justice's orders, leaving real people caught in the crosshairs of the powerhouse's overreach that appears to continue to operate unchecked.
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