Crypto dev loses lawsuit seeking protection from DOJ

In a blow to advocates of decentralised finance, a federal judge on Wednesday dismissed a lawsuit that sought to protect a crypto developer from possible criminal prosecution.

Last year, crypto developer Michael Lewellen sued the US attorney general, seeking a court order approving his publication of noncustodial, crypto-based crowdfunding software.

Without a court order, he would face up to five years in prison, he argued.

Lewellen cited the prosecution of Tornado Cash developer Roman Storm and Samourai Wallet developers Keonne Rodriguez and William Lonergan Hill.

All three were charged with operating an unlicensed money transmitting business. Their cases became a cause célèbre among DeFi proponents, who say they rely on a catastrophic misunderstanding of crypto software.

Despite receiving support from every major crypto advocacy group, Judge Reed O’Connor, of the Northern District of Texas, found Lewellen’s argument “unpersuasive.”

“Disappointed to see the court dismiss my suit today,” Lewellen wrote on X. “My lawyers are exploring all options for a path forward.”

The decision comes as lawmakers’ race to finalise major crypto legislation, which is widely expected to include language protecting DeFi developers. But that bill is coming perilously close to the height of US election season, when Congressional action typically grinds to a halt.

In his lawsuit, Lewellen said he was building an Ethereum protocol “to coordinate crowdfunding campaigns for charities and other projects.”

“Lewellen’s planned cryptocurrency software will be non-custodial, meaning that it will not give Lewellen any control, possession, or direction over the cryptocurrency that users put through the software,” the lawsuit began.

“It will simply be a tool that others can use to move money, like an envelope used to move checks in the mail.”

That meant the software and its creator shouldn’t be considered money transmitters like Western Union or Venmo, Lewellen argued.

His lawsuit received supporting briefs from crypto advocacy groups such as the Blockchain Association, DeFi Education Fund, the Solana Policy Institute.

It appeared the White House was also sceptical of prosecutors’ decision to wield money transmission laws against DeFi developers — in April 2025, Deputy Attorney General Todd Blanche issued a memo stating prosecutors should not pursue crypto exchanges, mixers, and “offline wallets” for “the acts of their end users or unwitting violations of regulations.”

It was a clear reference to the cases against Storm, Rodriguez, and Hill. Tornado and Samourai are both mixers that were used by cybercriminals to launder stolen crypto.

But prosecutors pressed forward. In July, Rodriguez and Hill pleaded guilty to operating an unlicensed money transmitting business. Both were sentenced to five years in prison.

In August, a jury convicted Storm of operating an unlicensed money transmitting business, though it couldn’t agree on money laundering and sanctions evasion charges. Storm has asked a judge to drop all three charges; prosecutors are seeking a retrial on the two that split jurors.

Judge O’Connor said Lewellen’s situation was totally unlike that of Storm and the Samourai developers.

In both those cases, prosecutors alleged the developers knew their software was being used by criminals and did nothing to stop it.

“The ‘core conduct’ of those cases is money laundering,” O’Connor wrote. “By contrast, the core conduct here would be running a business.”

That meant Lewellen hadn’t proven he was facing imminent prosecution, the judge said in his order dismissing the case.

“Hugely disappointing result,” Jonathan Schmalfeld, director of policy at the Digital Chamber, wrote on X.

“If the Blanche Memo was actually a panacea for developers’ right to create neutral code freely, [Roman Storm] wouldn’t still be fighting for his freedom. Whether through market structure or elsewhere, developer protections MUST be codified into law.”

Aleks Gilbert is DL News’ New York based DeFi correspondent. Have a tip? You can reach him at [e-mail].