A fellow at the crypto think tank Coin Center has recently taken a bold step in the ongoing battle for clarity in cryptocurrency regulations. Michael Lewellen, a blockchain entrepreneur, filed a lawsuit against U.S. Attorney General Merrick Garland on Thursday, hoping to secure a judge’s guarantee that the Department of Justice (DOJ) won’t prosecute his upcoming crypto project for violating money transmitting laws.
The lawsuit raises significant concerns regarding the DOJ’s recent criminal prosecutions of software developers involved in the release of noncustodial cryptocurrency software. Notably, it references the ongoing cases against Tornado Cash developer Roman Storm and Samourai Wallet co-founder Keonne Rodriguez, asserting that these prosecutions are not only unconstitutional but also infringe on the First and Fifth Amendments of the U.S. Constitution.
Lewellen argues that the DOJ’s actions contradict its own representations, which state that developers are not acting as money transmitters unless they have “total independent control over the value” being transferred. This disconnect is troubling for many in the crypto community, especially as worries surrounding governmental overreach into crypto privacy software development grow both in the U.S. and internationally.
Storm faces the prospect of up to 45 years in prison based on charges related to his involvement with Tornado Cash, while Rodriguez could be sentenced for a maximum of 25 years for his role in creating Samourai Wallet. Both parties have pleaded not guilty and are preparing for trial this year.
In light of the ambiguous regulatory landscape surrounding cryptocurrencies, cases like Lewellen’s are increasingly surfacing. In 2022, two NFT artists similarly filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), seeking protection from potential civil penalties.
Through this lawsuit, Lewellen aims to sidestep the potential predicaments faced by Rodriguez and Storm. His forthcoming project, Pharos, is designed to operate as a crypto-based crowdfunding platform reminiscent of Kickstarter. Utilizing Ethereum, Pharos plans to incorporate a unique mechanism called “assurance contracts” that ensures donors receive their contributions back if a project fails to meet its funding goals. Privacy remains a priority, aiming to keep donor identities confidential.
Importantly, as the creator of Pharos, Lewellen will only collect a predetermined fee from successful projects. He is keen to emphasize that he will not hold any control over the cryptocurrency processed through his platform. This clear delineation is designed to bolster his legal argument.
As the DOJ prepares for a change in leadership, with incoming President Donald Trump poised to nominate former Florida Attorney General Pam Bondi to replace Garland, it remains to be seen how this legal battle will unfold. Regardless of the outcome, Lewellen’s lawsuit signifies a growing demand for clarity and consistency in cryptocurrency regulations and the protection of developers in this rapidly evolving landscape.
