Charlie Shrem, one of the founders and current CEO of BitInstant, and Robert Faiella, who allegedly used the alias “BTCKing,” will face allegations because of helping to sell more than $1 million in Bitcoin to Silk Road users, who then used the funds to anonymously engage in illicit transactions, explains Mashable.
Shrem and Faiella is to meet charges of “conspiring to commit money laundering and operating an unlicensed money transmitting business”. The company’s chief executive is also charged with failing to report suspicious activity.
Truly innovative business models don’t need to resort to old-fashioned law-breaking,” U.S. Attorney Preet Bharara said in a statement.
“When Bitcoin, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act.”
Officials claim that nabbed the Bitcoin head on Sunday at John F. Kennedy International Airport in New York, while Faiella was arrested at his home in Cape Coral, Fla., on Monday.
Federals suppose that Faiella charged Silk Road users a set summ of money to sell them Bitcoin anonymously from December 2011 to October 2013. Which is more, he allegedly filled the orders through Shrem’s Bitcoin company, based in New York.
And despite Faiella was the person who had a vendor profile on Silk Road, investigators believe that the Bitcoin’ co-founder is also culpable for knowingly facilitating the crimes. The criminal complaint filed against the two describes Shrem’s role as follows:
“Not only did Shrem knowlingly allow Faiella to use [Shrem’s] company’s services to buy Bitcoins for his Silk Road customers, he personally processed Faiella’s transactions, gave Faiella discounts on his high-volume orders, willfully failed to file suspicious activity reports about Faiella, and deliberately helped Faiella circumvent the company’s [anti-money laundering] restrictions, even though it was Shrem’s job to enforce them.”
Last year reporters interviewed Shrem about his startup BitInstant that was launched back in 2011 with a $10,000 loan from his mother.
Soon he managed to caught attention of high-profile investors such as Tyler and Cameron Winklevoss, the Harvard twins who claim Mark Zuckerberg stole their idea when he invented world’s best social networking site Facebook.
“Charlie has been in the space for a very long time, and he has an impeccable reputation among Bitcoiners,” Cameron Winklevoss told TechCrunch last spring.
Some experts suggest that the Bitcoin CEO might have even been a Silk Road customer. After receiving a shipment of marijuana brownies, Shrem wrote, “wow, Silk Road actually works,” in an online chat with an unnamed individual, investigators claim.
The FBI took down Silk Road, which it called “the most sophisticated and extensive criminal marketplace on the Internet,” on Oct. 1, 2013.
According to Mashable, “the site operated for about two and a half years, during which time it facilitated about $1.2 billion in illicit transactions in Bitcoin, according to court documents.”