Monday, September 25, 2023
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BitInstant CEO Accused|of Money Laundering

(CN) - Bitcoin entrepreneur Charlie Shrem and a Florida man sold more than $1 million in bitcoins to people trying to buy drugs on the Silk Road website, federal prosecutors say.

According to a criminal complaint unsealed Monday, BitInstant CEO Charlie Shrem helped a Silk Road user sell the digital currency to customers of the Silk Road website, which federal prosecutors targeted last December.

The Silk Road site was an online black market for illegal drugs until the FBI shut it down in October.

Shrem allegedly teamed up with 52-year-old Robert Faiella, the owner of a bitcoin exchange service called BTCKing, to process bitcoin sales for Silk Road customers.

Prosecutors say Faiella received bitcoin orders from Silk Road users, and Shrem used a New York-based company to process those orders. He allegedly "caus[ed] funds to be transferred to an account that Faiella controlled at a third-party bitcoin exchange service based in Japan."

The New York company's bank records "show millions of dollars being wired by the company to the third-party exchange, which would have been used in part to fund the company's transfers to 'BTCKing's' exchange account," according to the complaint in the Southern District of New York.

The men face two counts of operating an unlicensed money transmitting business, one count of conspiring to launder money and one count of failing to file a suspicious activity report.

Shrem's arrest came as a surprise to many in the Bitcoin community, as the 24-year-old CEO was a rising star, scheduled to speak at a bitcoin conference in Miami this weekend. His company also had some high-profile backers, including the Winklevoss twins.

Criminal charges have been filed against the Silk Road website's owner, Ross William Ulbricht, and its three alleged operators: Andrew Michael Jones, Gary Davis and Peter Phillip Nash.

BitInstant's website is no longer available.

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