Prominent Bitcoin entrepreneur charged with money laundering

Mon Jan 27, 2014 6:40pm EST
 
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By Emily Flitter

NEW YORK (Reuters) - The vice chairman of the Bitcoin Foundation, a trade group promoting the adoption of the digital currency, has been charged by U.S. prosecutors with conspiring to commit money laundering by helping to funnel cash to illicit online drugs bazaar Silk Road.

Charlie Shrem, who had financial backing from the Winklevoss twins and is well known as one of the bitcoin's biggest global promoters, was arrested on Sunday at John. F. Kennedy International Airport in New York, the U.S. Attorney's Office in Manhattan said on Monday.

Shrem, who was also charged with operating an unlicensed money transmitting business, appeared in U.S. District Court in Manhattan on Monday and was released on $1 million bond.

"At this point the allegations in the complaint are simply allegations, and Mr. Shrem is presumed innocent," his lawyer Keith Miller said.

The 24-year-old entrepreneur, who lives above a bar he jointly owns in Manhattan that accepts bitcoins as payment, was CEO of BitInstant, a bitcoin exchange company that closed last summer. According to prosecutors, Shrem conspired with a Florida resident, Robert Faiella, who ran an illegal exchange, to sell more than $1 million in bitcoins to users of Silk Road, which was shuttered by authorities last year.

Faiella, 52, is also charged in the complaint filed in U.S. District Court in Manhattan with conspiring to commit money laundering and operating an unlicensed money transmitting business. He was arrested at his home in Coral Gables, Florida. At his court hearing on Monday in federal court in Florida, Faiella consented to detention until Wednesday, at which point there will be a bail hearing.

Shrem could not be reached for comment. A person who answered the phone at Faiella's house and declined to be identified said, "Nobody wants to talk."

Bitcoin is a digital currency that is not backed by a government or central bank and whose value fluctuates according to demand by users. Users can transfer bitcoins to each other over the Internet and store the currency in digital "wallets."   Continued...

 
A mock Bitcoin is displayed on a table in an illustration picture taken in Berlin January 7, 2014. REUTERS/Pawel Kopczynski