Bitcoin traders arrested over money laundering

Bitcoin traders arrested over money laundering

Two prominent Bitcoin traders have been arrested in the United States (US) under charges of money laundering, marking a crackdown on the virtual currency while discussions are underway on how it can be regulated.

Charlie Shrem, chief executive officer (CEO) of BitInstant, a Bitcoin exchange that closed down last year, and Robert Faiella, known also as “BTCKing” (Bitcoin King), have been arrested for allegedly selling over US$1 million of the virtual currency to users of online drugs marketplace The Silk Road.

Last year the dark web’s market for drugs and other illegal wares was shut down and its founder Ross William Ulbricht, known also as Dread Pirate Roberts, arrested by the Federal Bureau of Investigation (FBI).

BitInstant was backed by Tyler and Cameron Winklevoss, the twins who took Mark Zuckerberg to court claiming he stole the idea for Facebook from them.

Shrem and Faiella are both being charged with conspiracy to commit money laundering and operating an unlicensed money transmitting business.

Shrem is also facing charges of wilful failure to file a suspicious activity report.

“Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way,” said Drug Enforcement Agency (DEA) acting special agent in charge James Hunt.

The US Department of Justice (DOJ) released a statement stating Faiella used The Silk Road as a marketplace for an underground Bitcoin exchange, sourcing the virtual currency from BitInstant, a company that sought to provide anonymity in the exchange of physical currency to cryptocurrency.

The DOJ alleges that Shrem was not only the founder but also its compliance officer and failed to report suspicious activity to the relevant authorities.

“Shrem, who personally bought drugs on Silk Road, was fully aware that Silk Road was a drug-trafficking website, and through his communications with Faiella, Shrem also knew that Faiella was operating a Bitcoin exchange service for Silk Road users,” the government organ said in a statement.

The arrests coincide with talks in which California and New York State discuss how regulation can be imposed upon Bitcoin.

Posted in: Internet

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