Bitcoin CEO Arrested for Aiding Silk Road

By Shawn Dwyer 01/29/14

Federal agents charged Charlie Shrem and Bitcoin exchanger Robert Faiella with conspiracy to commit money laundering, among other crimes.

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The U.S. Attorney for the Southern District of New York has brought charges against Bitcoin exchanger Robert M. Faiella, 52, and BitInstant CEO Charlie Shrem, 24, for their alleged involvement with the online drug market Silk Road.

According to the attorney office's press release, Shrem and Faiella conspired to exchange over $1 million in cash for Bitcoins that were used to purchase illegal drugs on Silk Road. Shrem and Faiella are each charged with one count of conspiracy to commit money laundering, which carries a maximum of 20 years in prison, and one count of operating an unlicensed money transmitting business, which carries a maximum of five years. Shrem also received the additional charge of failure to report suspicious activity, which would tack on another maximum of five years in prison.

"Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way," said DEA Acting Special-Agent-in-Charge James J. Hunt. "Drug law enforcement's job is to investigate and identify those who abet the illicit drug trade at all levels of production and distribution including those lining their own pockets by feigning ignorance of any wrong doing and turning a blind eye."

At the time of his arrest, Shrem was serving as the vice chairman of the Bitcoin Foundation, a position he immediately resigned. “While Charlie has contributed a great deal of personal effort and resources to enhance the adoption of Bitcoin worldwide, a prolonged legal dispute would inevitably detract from advancing that core mission," said board member Jon Matonis. "Therefore, in order to focus on his pending trial, it has been mutually decided that Charlie Shrem resign from the Board of Directors, effective immediately. The Board accepted that resignation today."

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Shawn Dwyer is a writer, editor and content producer living in Los Angeles. You can find him on Linkedin.