Bitcoin dealers charged in the US

Bitcoin dealers charged in the US

Summary: US authorities have filed criminal charges against two operators of a Bitcoin exchange, including the head of a company with high-profile investment backers, which enabled its users to buy drugs and other illicit goods on the Silk Road underground website.

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TOPICS: Legal, Tech Industry
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A criminal complaint unsealed by officials on Monday said the Bitcoin exchange violated money laundering laws by allowing its users to buy drugs and other illicit goods on the Silk Road underground website.

Federal prosecutors said they charged Robert Faiella and Charlie Shrem, who ran a company allowing people to use cash to buy Bitcoins. The two are charged with conspiracy to commit money laundering and running an unlicensed money transmitting business, according to a statement from the US Attorney's office in New York.

Shrem, 24, who was also charged with violating the Bank Secrecy Act by failing to file any suspicious activity reports, was arrested on Sunday at John F Kennedy International Airport in New York, officials said.

Authorities did not name the company involved in the scheme, but Shrem is chief executive of BitInstant and is a self-described "Bitcoin evangelist", whose venture is backed by Tyler and Cameron Winklevoss, known for a legal spat over the founding of Facebook.

Shrem is also vice chair of the Bitcoin Foundation, a group aimed at promoting use of the crypto-currency.

The Winklevoss brothers said in a statement on Monday that they were "passive" investors in BitInstant and believed it complied with all laws.

"When we invested in BitInstant in the autumn of 2012, its management made a commitment to us that they would abide by all applicable laws — including money laundering laws — and we expected nothing less," said the statement.

"Although BitInstant is not named in today's indictment of Charlie Shrem, we are obviously deeply concerned about his arrest ... and will do everything we can to help law enforcement officials. We fully support any and all governmental efforts to ensure that money laundering requirements are enforced."

Faiella, 52, was arrested at his home on Monday in Cape Coral, Florida, according to officials.

"As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site Silk Road," said US Attorney Preet Bharara in a statement.

"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."

The new charges come more than three months after federal officials seized the Silk Road website used for drugs, hacker tools, and other illegal goods and arrested its alleged mastermind, Ross William Ulbricht, who was said to be "Dread Pirate Roberts".

Ulbricht, who is awaiting trial in New York, has denied the charges and also claims that he is not "Dread Pirate Roberts".

In November, a message appeared on Reddit claiming that Silk Road had reopened weeks after it was shut down by the FBI.

Bitcoin was invented in the wake of the global financial crisis by a mysterious computer guru using the pseudonym Satoshi Nakamotoby. While Bitcoins have gained in legitimate transactions, the unregulated currency has also been linked to various kinds of criminal activity.

Topics: Legal, Tech Industry

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5 comments
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  • bitcoin is a con like the other digital currencies

    What we have here is a way for folk to do things illegal and subvert the law. The 1% need this tool are a financing it with chump chain.

    Then we have the stupid follow the stupid hoping that someone else is more stupid then them and they try to profit from it.
    johny bizaro
    • need this tool and are financing it.

      When you have billions and millions is chump change.
      johny bizaro
  • But no, they can't

    post bail in bitcoins!
    jallan32
  • Of course nobody would ever conduct illicit activity using the U.S. Dollar

    Of course nobody would ever conduct illicit activity using the fiat U.S. Dollar, particularly not any portion of our underground govt. [sarcasm off]
    nwtim
  • Bye bye Bitcoin?

    I'm waiting for the hammer to fall on this "currency". Would never touch it with the lack of security.
    Gisabun