Bitcoin Operators Charged in N.Y. 'Silk Road' Bust

2 Bitcoin operators charged in NY 'Silk Road' bust
Louis Lanzano/APU.S. Attorney Preet Bharara.

NEW YORK -- The top executive of a Manhattan-based bitcoin company and a Florida bitcoin exchanger have been charged with conspiring to commit money laundering by selling more than $1 billion in bitcoins to users of the black market website Silk Road, which let users buy illegal drugs anonymously, authorities said Monday.

Charlie Shrem, 24, the chief executive officer of BitInstant and vice chairman of a foundation that promotes the bitcoin currency system, was arrested Sunday at New York's Kennedy Airport while Robert Faiella was arrested Monday at his Cape Coral, Fla., residence, prosecutors said in a news release. Federal prosecutors in Manhattan said Shrem personally bought drugs on Silk Road and was fully aware that it was a drug-trafficking website.

Shrem's defense attorney didn't immediately return a message seeking comment ahead of a court appearance scheduled for Monday. It wasn't immediately clear who would represent Faiella in court.

Authorities have said Silk Road's San Francisco operator generated more than $1 billion in illicit business from January 2011 through September on the website,
which used the tough-to-track digital currency called bitcoin before it was shut down.

U.S. Attorney Preet Bharara said Faiella and Shrem conspired to sell more than $1 million in bitcoins to criminals who wanted to sell narcotics on Silk Road between December 2011 and October.

"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," Bharara said.

James J. Hunt, acting head of the Drug Enforcement Administration's New York office, said the defendants were "hiding behind their computers" as they earned substantial profits by facilitating anonymous drug sales.

According to prosecutors, Faiella operated under the name "BTCKing" as he ran an underground bitcoin exchange on the Silk Road website, where bitcoins were the only form of payment accepted.

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These young arrogant punks think that they have the world on their hands, kids, you must crawl before you can walk, and remember, we no longer are free, at the moment the government watches your every move, trust no body, specially tyrants

January 28 2014 at 2:19 PM Report abuse rate up rate down Reply

The American "police state" at work. Gotta crush the competition cant have the citizens working outside of the american fiscal ponzi scheme. They want their share. Pathetic

January 27 2014 at 6:21 PM Report abuse -3 rate up rate down Reply
1 reply to morphiss7's comment

So cracking down on illegal activity is a BAD thing???

January 27 2014 at 8:02 PM Report abuse +3 rate up rate down Reply

The rule is to profit from illegal activity you have to work for the government. They arrest people who try to muscle in on their that rackets.

January 27 2014 at 6:03 PM Report abuse -1 rate up rate down Reply

all they did was sell a product, somebody else was doing the illegal stuff.

January 27 2014 at 5:44 PM Report abuse -4 rate up rate down Reply