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Bitcoin exchange CEO arrested

By Allison Ross · Bankrate.com
Tuesday, January 28, 2014
Posted: 9 am ET

As the bitcoin community continues to work to gain mainstream acceptance, it's been hit with the news that one of its proponents and cheerleaders has been arrested.

Charlie Shrem, chief executive of bitcoin exchange BitInstant, was arrested Sunday and charged with money laundering after the U.S. Department of Justice alleged that he and another man "schemed" to exchange bitcoins so people could make illegal drug purchases on the online marketplace Silk Road.

"Hiding behind their computers," Shrem and co-defendant Robert Faiella, a Silk Road user who operated under the name BTCKing, allegedly exchanged more than $1 million in bitcoins "for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road," according to a news release from the U.S. Attorney's Office for the Southern District of New York.

Shrem was arrested at John F. Kennedy International Airport in New York, according to the release. Authorities say he knew some of the bitcoins he was selling were being used for drugs, but did not alert authorities.

"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," Manhattan U.S. Attorney Preet Bharara said in a prepared statement. "We will aggressively pursue those who would co-opt new forms of currency for illicit purposes."

Shrem's arrest surprised the bitcoin community and provided another reminder to consumers about the cryptocurrency's history with illegal activities.

The Silk Road was an online black market people used to anonymously buy and sell illegal products and activities, and its payment method was the bitcoin. When the FBI shut down the Silk Road in October, it seized millions of dollars' worth in bitcoins, becoming the holder of the largest single bitcoin wallet.

Bitcoin proponents have been working to distance the cryptocurrency from its association with the Silk Road and have been trying instead to tout the benefits of the technology. Shrem was among the leaders of that movement. He was even called a "Bitcoin evangelist" by The Wall Street Journal. In addition to his company, BitInstant (which counts the Winklevoss twins among its investors), Shrem is also vice chairman of the Bitcoin Foundation and is part owner of the EVR restaurant in Manhattan that accepts bitcoins.

What does the future look like for bitcoins? Share your thoughts in the comments.

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24 Comments
Grampa
March 03, 2014 at 5:36 pm

Are there 8 Bitcoins in Bytecoin?

RYAN MENGES
March 03, 2014 at 9:09 am

@NIC ID LIKE TO AGREE WITH YOU BELIEVE ME! BITCOINS ARE THE START OF THE FOR A LACK OF A BETTOR NAME "CHIP" IMPLANT THAT WILL BE INSERTED INTO THE FOREHEAD OR WRIST LIKE MANY OF THE CHURCH OF SCIENTOLOGY ACTORS, ACTRESS'S, & MEMBERS HAVE BEEN USING FOR YEARS! MANY RELIGIOUS FACTIONS CALL IT "THE MARK OF THE BEAST" & HOW CAN YA BLAME THEM??? I MEAN REALLY IF WE READ THE DEBT REPORTS IN THERE SO CALLED "OFFICIAL REPORTS" THERE ISNT ANY MONEY ANYWAYS!!!

RYAN MENGES
March 03, 2014 at 9:02 am

A HIGH POWERED CORPORATE CHEIF? INVOLVED IN MONEY LAUNDERING??? AS WELL AS DRUGS??? NO WAY, U MUST BE #HIGH

Joe Interlandi
February 21, 2014 at 7:40 pm

It is interesting to note that Mr Shrem's EVR Restaurant accepts the bitcoin for payment from its customers, but I think it would be more interesting to know whether EVR's suppliers are accepting bitcoins for the goods they sell to EVR.

Das Koenig
February 17, 2014 at 2:05 am

Bitcoin. PT Barnum would approve.

nick
February 16, 2014 at 11:47 am

The government will not allow bitcoins.
It will be the death of the dollar

Carlos
February 14, 2014 at 12:00 am

Just what is the Bitcoin and from whence does it derive its value or worth?

David
February 13, 2014 at 7:28 pm

Bitcoin, competition for some very powerful people like the Federal Reserve Board

Neal Kluge
February 08, 2014 at 7:40 am

If Bitcoin system works unchallenged, there ill be a Version 2 , 3 , 100 , 10000, etc.

People can then create instant unlimited amounts of money. Also there will be many many 'currencies' and an increase in cheating ( No, you gave me only one Bit not a million Bits, etc.)

This new currency will not survive. As Warren Buffett said " We have 50,000 Million Dollars and we have NOT moved a single dollar to Bitcoins!"

Tim
February 03, 2014 at 6:15 pm

I would fight that the federal government is allowing states to sell pot and refuse to prosecute so there-fore made it legal or they are in-fact acting illegally by allowing it. It probably wouldn't get far but would make them respond.

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