A federal judge has tossed a lawsuit filed by crypto developer Michael Lewellen. Lewellen sought a court order approving his publication of noncustodial, crypto-based crowdfunding software. But the judge said Lewellen couldn’t prove he would get charged with a crime for releasing the software. 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. “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. “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.”
A federal judge has dismissed Michael Lewellen’s lawsuit seeking a court order to publish noncustodial, crypto-based crowdfunding software, finding that Lewellen did not demonstrate imminent prosecution. The ruling draws a distinction between the proposed noncustodial tool and traditional money transmitters, suggesting the software would not, by itself, constitute a money service. Lewellen pointed to prosecutions of Tornado Cash and Samourai Wallet developers to argue for protections, while prosecutors maintained those cases centered on unlicensed money transmitting activities and money laundering. The judge ruled that Lewellen’s proposed conduct differed fundamentally, focusing on running a business rather than active money laundering, and therefore did not meet the threshold for an immediate criminal threat. As crypto legislation advances, the Blanche memo and related regulatory debates continue to shape expectations for DeFi developers, with advocates calling for codified protections in law. The decision leaves a narrowed path forward for developers seeking clarity, highlighting ongoing tensions between innovation and enforcement in the crypto space.
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