Less than a year after raising $1.5 million for his Bitcoin exchange start-up BitInstant, CEO Charlie Shrem has been charged with money laundering. A news release from U.S. prosecutors in Manhattan said that Shrem knowingly facilitated illegal purchases on the now-shuttered underground drug marketplace Silk Road.
Silk Road was a Web site that allowed users to buy everything from heroin to fake IDs. To help preserve users' anonymity, the site required all transactions to be conducted in bitcoins. According to the government, a man named Robert Faiella worked with Shrem to sell bitcoins to Silk Road users. The two men allegedly sold more than $1 million worth, with Shrem giving Faiella a volume discount on BitInstant's fees.
"Upon receiving orders for Bitcoins from Silk Road users," the government said, Faiella filled the orders through BitInstant, which "was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service."
According to the government, that runs afoul of U.S. money laundering laws, which require payment companies like BitInstant to collect information about their customers, monitor their transactions, and report "suspicious" transactions to the government. Shrem failed to do this, the government says. Faiella is also facing charges.
READ MORE AT WASHINGTON POST
