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You can find the current article at its original source at http://www.theguardian.com/technology/2014/jan/27/bitcoin-foundation-vice-chair-arrested-money-laundering
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| Bitcoin Foundation vice chair arrested for money laundering | Bitcoin Foundation vice chair arrested for money laundering |
| (about 1 hour later) | |
| The vice chair of the Bitcoin Foundation, Charlie Shrem, has been arrested for conspiracy to commit money laundering and operating an unlicensed money transmitting business. | The vice chair of the Bitcoin Foundation, Charlie Shrem, has been arrested for conspiracy to commit money laundering and operating an unlicensed money transmitting business. |
| The arrest comes as a major blow for the digital currency lobby group. Bitcoin Foundation staff have been working hard to distance the digital currency from its links to crime. They testified to the Senate last year and have been lobbying regulators in Washington. | |
| Patrick Murck, Bitcoin’s general counsel, said: “I don’t think it’s damaging for the Foundation. Foundation wasn’t involved in any of the allegations.” | |
| The charges stem from Shrem's ownership of the BitInstant bitcoin exchange, of which he is the chief executive, co-founder and compliance officer. The exchange hit the headlines in May 2013 when the Winklevoss brothers led a seed round which raised $1.5m of investment. | The charges stem from Shrem's ownership of the BitInstant bitcoin exchange, of which he is the chief executive, co-founder and compliance officer. The exchange hit the headlines in May 2013 when the Winklevoss brothers led a seed round which raised $1.5m of investment. |
| A second man, Robert Faiella, has also been arrested and charged for the same crimes relating to his operation of a small bitcoin exchange under the name BTCKing. | A second man, Robert Faiella, has also been arrested and charged for the same crimes relating to his operation of a small bitcoin exchange under the name BTCKing. |
| The charges, unsealed by the Manhattan distort attorney Preet Bharara, accuse the pair of "engaging in a scheme to sell over $1m in bitcoins to users of Silk Road", the online black marketplace which was closed by the FBI in October 2013. | |
| Shrem is additionally charged with "wilfully failing to file any suspicious activity report regarding Faiella's illegal transactions through the company," the documents reveal. | Shrem is additionally charged with "wilfully failing to file any suspicious activity report regarding Faiella's illegal transactions through the company," the documents reveal. |
| “As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site, Silk Road," said Manhattan U.S. Attorney Preet Bharara. | |
| "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. We will aggressively pursue those who would co-opt new forms of currency for illicit purposes.” | |
| The substance of the allegation is that Faiella offered bitcoins for sale on the Silk Road website, a move which would entail knowing of their involvement in the drugs trade. Those bitcoins were purchased from the Bitinstant exchange. | The substance of the allegation is that Faiella offered bitcoins for sale on the Silk Road website, a move which would entail knowing of their involvement in the drugs trade. Those bitcoins were purchased from the Bitinstant exchange. |
| Shrem, as the compliance officer of the exchange, was in charge of ensuring its compliance of anti-money laundering rules. | |
| The charges, delivered by an IRS agent who was assigned to the New York Organised Crime Drug Enforcement Strike Force, allege that "not only did Shrem knowingly allow Faiella to use the 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, wilfully 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." | The charges, delivered by an IRS agent who was assigned to the New York Organised Crime Drug Enforcement Strike Force, allege that "not only did Shrem knowingly allow Faiella to use the 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, wilfully 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." |
| In December 2013, Shrem was profiled by news website Vocativ in a piece titled "My Night Out With Bitcoin Millionaire and Proud Stoner Charlie Shrem". | |
| In it, Shrem tells reporter Eric Markowitz that "I won’t hire you unless I drink with you or smoke weed with you", and says that he was forced to temporarily close BitInstant several times due to increased regulatory scrutiny. | |
| "If we want to exist 20 years from now, we want to make sure all of our ducks are in a row,” he tells Markowitz, “and right now, they’re not." | |
| The Winklevoss brothers, whose investment in BitInstant is just a small part of their total investment in bitcoin and related companies, are due to speak in hearings on the crypto-currency organised by the New York State Department of Financial Services on Tuesday and Wednesday. | |
| Following the news of Shrem and Faiella's arrest, the price of bitcoin on the Mtgox exchange dropped by 3%. | |
| • How an attempt to track down the perpetrators of the biggest bitcoin heist ever turned into a digital wild goose chase | • How an attempt to track down the perpetrators of the biggest bitcoin heist ever turned into a digital wild goose chase |