Judge Denies Crypto Dev’s Bid for DOJ Protection

In a ruling, U.S. District Judge Reed O’Connor dismissed the case brought by developer Bryan Lewellen concerning his now-defunct mixer project. Lewellen had sought a declaratory judgment that his software did not constitute an unlicensed money transmitting business, a common charge in recent crypto-related enforcement actions. According to reports, after the decision, the developer stated, My lawyers are exploring all options for a path forward.

Judge O’Connor’s decision hinged on the distinction between Lewellen’s activities and other high-profile cases involving crypto mixers like Tornado Cash and Samourai Wallet. The judge wrote that in those instances, prosecutors alleged the developers were aware their platforms were being used for illicit purposes, such as laundering criminal proceeds, and failed to stop it. The ‘core conduct’ of those cases is money laundering, O’Connor wrote in his order. By contrast, the core conduct here would be running a business. This distinction was central to the judge’s finding that Lewellen’s situation did not present an imminent threat of prosecution.

The court dismissed the lawsuit primarily because Lewellen could not prove he was facing an immediate and credible threat of prosecution from the Department of Justice. For a court to offer a preemptive or declaratory judgment, the plaintiff must demonstrate that a federal agency is poised to take enforcement action. According to the judge’s order, Lewellen failed to meet this legal standard, rendering his request for protection from the DOJ premature. The dismissal was not a ruling on the merits of whether the DeFi project was a money services business, but on the procedural grounds that there was no active controversy for the court to resolve.

The developer’s legal team will now evaluate its next steps following the dismissal. For the broader DeFi industry, the ruling leaves developers in a continued state of regulatory uncertainty. Industry participants and legal experts will closely watch for any potential DOJ action against similar platforms, as well as monitor the progress of the crypto legislation moving through Congress. Jonathan Schmalfeld, director of policy at the industry advocacy group Chamber of Digital Commerce, called the outcome a Hugely disappointing result, signaling that the industry sees this as a setback in the quest for legal clarity.