Developer Michael Lewellen Fights DOJ Interpretation of Money Transmitting Statute in Fifth Circuit
Key Summary
Software developer Michael Lewellen pressed his pre-enforcement challenge against the Department of Justice in the United States Court of Appeals for the Fifth Circuit on Monday. Lewellen seeks a declaratory judgment to shield his non-custodial crowdfunding software, Pharos, from federal prosecution under 18 U.S.C. § 1,960. The appeal targets the district court's dismissal, which relied heavily on a discretionary policy memo issued by former Deputy Attorney General Todd Blanche after the initial lawsuit commenced.
Key Bullets
- Michael Lewellen filed a reply brief in the Fifth Circuit on Monday challenging the DOJ interpretation of 18 U.S.C. § 1960.
- The lawsuit aims to secure a declaratory judgment protecting the non-custodial crowdfunding software Pharos from federal prosecution.
- Court filings show the DOJ previously rejected FinCEN 2019 Guidance during the prosecutions of Tornado Cash and Samourai Wallet developers.
- Legal experts note that internal prosecutorial policy memos provide no binding protection against criminal charges for software publishing.
Fifth Circuit Appeal Challenges DOJ Enforcement
Software developer Michael Lewellen filed a reply brief Monday in the United States Court of Appeals for the Fifth Circuit, pushing back against the Department of Justice regarding the statutory reach of 18 U.S.C. § 1,960. The legal action contests a district court ruling that prematurely dismissed a pre-enforcement challenge seeking a declaratory judgment for Pharos, a non-custodial crowdfunding application.
Congressional gridlock stalled the Blockchain Regulatory Certainty Act. Federal courts remain the primary battleground for developers facing potential criminal liability for publishing non-custodial source code. The legal team argued that the government continues to apply unlicensed money-transmitting statutes outside statutory boundaries.
Precedents Shape Credible Threat of Prosecution
The Department of Justice argued in court dockets that Lewellen lacks standing because no direct investigation or formal enforcement action has targeted him. The reply brief countered that pre-enforcement challenges exist precisely to prevent citizens from waiting for federal indictment before obtaining legal clarity.
Prior federal indictments against the developers of Tornado Cash and Samourai Wallet establish a credible foundation for fear of prosecution. The DOJ rejected FinCEN 2019 Guidance during those proceedings, asserting that software publication can constitute money transmission despite developers holding zero custody of user funds.
Policy Memos Fail To Replace Statutory Protection
Government attorneys defended the dismissal by citing a policy memo issued by former Deputy Attorney General Todd Blanche. Court documents confirm that the memo arrived after Lewellen initiated his lawsuit, rendering it legally ineffective for erasing pre-existing standing.
The Blanche memo outlines discretionary enforcement priorities rather than altering the government's official legal interpretation of 18 U.S.C. § 1,960. The DOJ refused to disavow future prosecutions targeting unyielding software developers who publish applications without registering as money-transmission businesses with FinCEN.
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