Twenty-four year old Charlie Shrem – a Yeshiva of Flatbush grad who is the CEO of the digital currency exchange BitInstant and the vice chairman of the Bitcoin Foundation, a nonprofit group aimed at promoting the digital currency – was arrested earlier this week with another man on money laundering charges.
Electronic Currency Innovator Busted For Money Laundering And Drug Buys
Shmarya Rosenberg • FailedMessiah.com
Twenty-four year old Charlie Shrem, the CEO of the digital currency exchange BitInstant and vice chairman of the Bitcoin Foundation, a nonprofit group aimed at promoting the digital currency, was arrested earlier this week with another man on money laundering charges, the LA Times reported.
Shrem is Jewish and attended Yeshiva of Flatbush in Brooklyn.
He and Robert M. Faiella are accused of laundering money through a notorious drug-trafficking website, Silk Road, by selling more than $1 million worth of bitcoins to people trafficking in illegal drugs there.
Silk Road was shut down by the FBI in October.
Federal prosecutors also charged Shrem and Faiella of skirting regulations meant to keep criminal proceeds out of the financial system.
"This is going to send shivers through a lot of people. It's intended clearly to send a lot of messages to the bitcoin community,” Carol Van Cleef, a partner at the law firm Patton Boggs in Washington, D.C., and an expert on money laundering, told the paper.
Shrem and Faiella were each charged with one count of conspiracy to commit money laundering and one count of operating an unlicensed money-transmitting business.
Faiella allegedly ran an underground bitcoin exchange on Silk Road while Shrem – who also served as the chief compliance officer of BitInstant – allegedly knew what Faiella's was doing and was complicit in it. Shrem was charged with willful failure to file a suspicious activity report with regulators as a result.
Shrem also allegedly bought drugs on Silk Road.
"Truly innovative business models don't need to resort to old-fashioned law-breaking, and when bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would co-opt new forms of currency for illicit purposes,” Preet Bharara, the U.S. attorney in Manhattan, reportedly said.