News Column

Bitcoin Big Wheels Charged With Money Laundering

January 28, 2014

Donna Leinwand Leger, @Donna Leinwand, USA TODAY

bitcoin
Bitcoin (file photo)

Federal agents have charged a Bitcoin dealer and an executive at a Bitcoin company with money laundering for allegedly selling more than $1 million worth of the cybercurrency to people doing business on Silk Road, a black market website that dealt in drugs and other illicit goods.

Robert Faiella, 52, allegedly known as "BTCKing," was arrested Monday at his home in Cape Coral, Fla., and charged with money laundering and operating an unlicensed money transmitting business.

Charlie Shrem, 24, chief executive officer and compliance officer at the Bitcoin exchange company BitInstant.com, was arrested Sunday at John F. Kennedy International Airport in New York.

He is charged with money laundering, operating an unlicensed money transmitting business and violating the Bank Secrecy Act by failing to file reports of suspicious activity with the federal government for Faiella's transactions on the Bitcoin exchange.

Bitcoin, launched in 2009, is a decentralized digital currency that is traded from person to person rather than through banks. It is generated by a computer algorithm and has no issuing or regulating country.

The currency is not illegal in the United States and many businesses accept it as a form of payment.

Silk Road, an underground drug bazaar shut down by federal agents in October, required all buyers and sellers to transact their business in Bitcoins.

Unlike credit cards or checks, Bitcoin transactions can be conducted anonymously, like cash.

Shrem is well-known in the Bitcoin community.

He is vice president of the BitCoin Foundation, a trade group that promotes Bitcoin as an alternative currency. In his bio on the foundation's website, Shrem is described as using "his position in both the old banking world and new, alternative currency world to help pave the way for the Bitcoin economy to emerge in early 2011."

Foundation spokeswoman Jinyoung Lee Englund said the organization is "surprised and shocked" by Shrem's arrest.

"As a foundation, we take these allegations seriously and do not condone illegal activity," she said.

BitInstant.com, one of the earliest Bitcoin businesses, drew investment from the tech-savvy Winklevoss twins, Cameron and Tyler. Their Winklevoss Capital last year invested $1.5 million in the business. In a statement issued Monday, the brothers said they were passive investors.

Dissatisfied customers sued BitInstant in July, accusing the company of inflated fees, violating the Electronic Fund Transfer Act and falsely representing its services.

Copyright 2014 USA TODAY

Original headline: Bitcoin dealers charged with money crimes


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Source: Copyright 2014 USA TODAY


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