The CEO of a bitcoin exchange was arrested at New York's JFK airport today in a multi-agency crackdown involving the Internal Revenue Service, the Drug Enforcement Agency, and the US Attorney’s office. Charlie Shrem, 24, is accused of engaging in a money laundering scheme with a user on the Silk Road website that helped narcotic traffickers clean their funds.
Shrem now faces up to 30 years in prison for three charges. Robert Faiella, a 52-year-old user on the site who went by the name “BTCKing,” was also charged and faces 25 years in prison. He was arrested in his hometown in South Florida.
According to the Justice Department, both Shrem and Faiella are charged with conspiring to commit money laundering and operating an unlicensed money-transmitting business. In addition, Shrem is charged with violating the Bank Secrecy Act for willfully failing to report Faiella's suspicious activity.
Bitinstant, the site Shrem headed, aimed to be a leader in the market for selling and buying Bitcoins. It had received $1.5 million dollar in seed funding led by the Winklevoss brothers, made famous during their court battles with Mark Zuckerberg over the founding of Facebook.
“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,” read a statement issued by Manhattan US Attorney Preet Bharara. “We will aggressively pursue those who would co-opt new forms of currency for illicit purposes.”
The crackdown is nothing new. Users of and those affiliated with the Silk Road, the deep-web site infamous for its anonymous drug market, have incurred a host of high-profile arrests recently. In December, three moderators from the site were arrested and charged with conspiracy to engage in narcotics trafficking, computer hacking, and money laundering. And in October, the alleged founder of the Silk Road, Ross Ulbricht, was arrested on similar charges in addition to being accused of paying more than $700,000 to have six people killed.