Blockchain Developer Sues DOJ Over Alleged Stifling of Crypto Innovation

• Michael Lewellen has filed a lawsuit against the DOJ, accusing it of misusing money transmission laws.
• The lawsuit claims prosecuting non-custodial protocol creators violates First Amendment and due process rights.
• The case joins other high-profile legal battles involving crypto developers under heightened regulatory scrutiny.

Michael Lewellen, a player in developing blockchains has initiated legal action against the U.S. Department of Justice (DOJ), alleging the Biden administration has impeded cryptocurrency innovation. The lawsuit accuses the administration of broadly applying money transmission laws, discouraging blockchain development, and driving talent out of the United States.

Allegations Against DOJ and Regulatory Ambiguity

Lewellen, affiliated with the nonprofit Coin Center, bases the lawsuit on his work with Pharos. Pharos is a non-custodial crowdfunding protocol that facilitates transparent cryptocurrency pooling for charitable and project-based fundraising. The protocol operates without third-party intermediaries, which Lewellen asserts exempts it from money transmitter regulations under Financial Crimes Enforcement Network guidelines.

The lawsuit argues that prosecuting creators like Lewellen violates free speech protected under the First Amendment. According to court documents, Lewellen claims that publishing and distributing code constitutes free expression and should not be penalized. He also alleges inconsistent application of laws has created regulatory ambiguity, violating due process rights.

Legal Demands and Case Objectives

Lewellen’s legal filing seeks a declaration that his business activities do not breach money transmission laws. It also requests an injunction to prevent the DOJ from prosecuting him and demands compensation for legal expenses incurred during the case.

In a post dated January 16, Lewellen explained the case’s broader significance, stating it aims to ensure innovation proceeds without fear. He also criticized the use of regulatory uncertainty as a deterrent to blockchain developers.

This lawsuit is part of a broader trend of increased scrutiny targeting cryptocurrency developers. Coin Center cited similar cases involving Tornado Cash founder Roman Storm and Samourai Wallet co-founder Keonne Rodriguez. Both faced charges for alleged unlicensed money transmission activities tied to cryptocurrency mixers.

Rodriguez and his co-founder, William Lonergan Hill, were arrested in April 2024 for money laundering linked to unlawful transactions worth $2 billion. Storm, facing criminal charges in New York, is set for trial on April 14.