Charlie Shrem of Bitcoin Foundation and BitInstant Arrested for Money Laundering
Charlie Shrem is a veteran in the Bitcoin space and currently operates two high-level roles: vice chairman of the Bitcoin Foundation and CEO of BitInstant.
In breaking news, Shrem was arrested on charges of conspiring to commit money laundering and operating an unlicensed money-transmitting business, along with a Silk Road user Robert Faiella. In a statement, the DOJ said that Shrem and Faiella were involved in a scheme to sell over $1 million in Bitcoins to users of “Silk Road,” the underground website that enabled its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement.
Read: The Fall of Silk Road
Shrem (pictured below) was arrested at Kennedy airport in New York, while Faiella was arrested at his home in Cape Coral, Florida.
Manhattan U.S. Attorney Preet Bharara said in the statement: “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. 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 coopt new forms of currency for illicit purposes.”
Shrem was CEO of BitInstant, a Bitcoin exchange that raised funding from the Winklevoss twins and later suspended operations. The Winklevosses issued this statement today.
When we invested in BitInstant in the fall 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. Although BitInstant is not named in today’s indictment of Charlie Shrem, we are obviously deeply concerned about his arrest. We were passive investors in BitInstant 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, and look forward to clearer regulation being implemented on the purchase and sale of bitcoins.
If these allegations are true, this is bad news for the Bitcoin ecosystem. Charlie Shrem was deeply involved and well known in the ecosystem as a founding member of the Bitcoin Foundation and a CEO of a premier Bitcoin startup. While it is positive news when the government arrests criminals who are misuing Bitcoin, such as Silk Road’s operator, this news is not inspiring when the person involved has a high-profile position in the community.
On Reddit, users were scrambling to understand the implications of this news. One user called Shrem’s case a witch hunt, saying “The US government case against Charlie Shrem is full of legal contradictions.” Another user criticized the government for letting big banks get away with money laundering and making an example of people like Shrem and Faiella, “So are they going to do what they did to HSBC? Just fine them and move along? Or, let me guess, they’re going to get screwed to the wall, financially drained, and serve prison sentences.”
In a trailer for the upcoming documentary The Rise and Rise of Bitcoin posted in May 2013, Shrem was quoted saying “I spend thousands of dollars, every day, on lawyers just to make sure I don’t go to jail.” Shrem’s part starts at 1:20 below.
Below is the full DOJ complaint against Shrem and Faiella.