Tags: bitcoin | silk road | laundering

Bitcoin Silk Road: Exec Charged With Laundering $1M Through Site

Image: Bitcoin Silk Road: Exec Charged With Laundering $1M Through Site Charlie Shrem

Tuesday, 28 Jan 2014 04:03 PM

By Morgan Chilson

The head of a New York Bitcoin exchange was arrested Monday on money laundering charges connected to facilitating drug sales through the online marketplace Silk Road.

Charlie Shrem, CEO of BitInstant, has been accused of helping Robert Faiella, of Cape Coral, Fla., sell bitcoins valued at more than $1 million to people buying illegal substances on Silk Road, CNN reported. Faiella, 52, was also arrested Monday and charged with conspiracy to launder money and running an unlicensed money transmitting business.

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Shrem’s business, BitInstant, is an exchange that lets people buy bitcoins, the new electronic currency, throughout the United States and in several foreign countries, including Brazil and Russia, CNN reported. As chairman of the Bitcoin Foundation, he has been a spokesperson and advocate for the currency.

U.S. Attorney Preet Bharara released a statement following the arrests.

“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," he said, according to the Associated Press.

U.S. Magistrate Judge Henry Pitman allowed Shrem to be released on bail, for nearly $1 million dollars in collateral, provided he lives with his parents and is electronically monitored. 

Asst. U.S. Attorney Serrin Turner pointed to a video Shrem put online in which he said he would be prepared to flee the country if there was any government interference in Bitcoin businesses, the AP reported.

“I have a plane ticket ready to take me to Singapore. There’s another corporation already set up,” Shrem said in the video.

Shrem’s attorney Keith Miller responded to the his client's arrest.

"The allegations in the complaint are simply allegations and he is presumed innocent," he said.

Shrem bought drugs on Silk Road and knew full well that what he was doing was illegal, federal prosecutors claim.

Silk Road had more than 1 million registered users and saw more than $1 billion worth of transactions from January 2011 until it was shut down in September 2013, the AP reported.

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