Blockchain developer Michael Lewellen has filed a lawsuit against the U.S. Department of Justice (DOJ), accusing the Biden administration of undermining cryptocurrency innovation by broadly interpreting money transmission laws.

Lewellen, a fellow at the nonprofit advocacy group Coin Center, argues that the administration’s actions have discouraged developers from building blockchain tools and forced talent to leave the United States.

Stifling Crypto Innovation

The lawsuit focuses on Lewellen’s work with Pharos. This non-custodial crowdfunding protocol facilitates the transparent and trustless pooling of cryptocurrency for charitable and project-based fundraising without requiring third-party intermediaries.

In a January 16 post on X, the Texas resident explained the motivation behind his legal challenge:

“This lawsuit is about ensuring innovators can create without fear and that laws aren’t misused to hold back progress.”

He also criticized what he sees as regulatory ambiguity weaponized to deter crypto builders, asserting that such practices must end.

Supported by Coin Center, Lewellen’s case challenges the DOJ on three main grounds. He claims the officials lack the statutory authority to prosecute him for operating an unlicensed “money transmitting” business.

The blockchain expert maintains that Pharos only enables users to manage crypto transactions without holding or controlling funds, meaning it does not qualify as a money transmitter under Financial Crimes Enforcement Network (FinCEN) guidelines.

He also argues that prosecuting software architects for writing and distributing code violates the First Amendment, which protects free expression. According to the court document, the DOJ’s actions punish creators for simply publishing code, which is an infringement on free speech.

Finally, the filing claims that the inconsistent application of laws violates due process. It points out that federal guidance has clarified that non-custodial crypto software creators are not money transmitters, yet coders like him are being prosecuted under that framework.

The legal action seeks a court declaration that the crypto entrepreneur’s business does not violate money transmission laws, an injunction to stop the DOJ from prosecuting him, and compensation for legal fees.

Crypto Developers Under Heightened Scrutiny

This development comes as the crypto industry faces increasing scrutiny and prosecutions targeting software programmers.

Coin Center highlighted similar cases, such as those involving Tornado Cash founder Roman Storm and Samourai Wallet co-founder Keonne Rodriguez. Both have faced charges for operating crypto mixers allegedly used for unlicensed money transmission and money laundering.

The Samourai Wallet creators were accused of enabling unlawful transactions worth $2 billion. This led to the arrests of Rodriguez and his co-founder William Lonergan Hill in April 2024 on money laundering charges.

Similarly, Storm is set to face trial on April 14 in New York on criminal charges related to Tornado Cash after a judge denied his motion to dismiss the case. Meanwhile, his partner, Roman Semenov, remains at large.