CEO of BitInstant, Charlie Shrem Arrested

Banker Resource
January 29, 2014 — 1,420 views  
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The arrest of CEO of BitInstant, Charlie Shrem, left everyone in the industry shocked. US government agents arrested Shrem under the charges of money laundering for customers of Silk Road which is an online drug bazaar. BitInstant is a Bitcoin exchange company. 

Charged with Money Laundering

US attorney of the Southern District of NY revealed that Shrem had extended help to someone whom he had not met personally. The person is said to be Robert Faiella who sold bitcoins worth more than a million to the customers of Silk Road. Faiella allegedly was involved in running an underground Bitcoin exchange with the name of BTCKing.

Shrem was arrested in New York at the John F. Kennedy International Airport while Faiella's arrest took place at his house in Cape Coral in Florida, a day after Shrem's arrest, said the prosecutor. Both of them have been charged with operating a business that transmitted unlicensed money. They have also been charged for money laundering. Apart from that, Shrem has an additional charge against him for not informing the federal officials about these illegal activities.

According to the complaint filed in the court, Faiella appeared as BTCKing on Silk Road for the first time in late 2011. This black market website allows people only to sell and buy goods with bitcoins. Faiella got into the business of making bitcoins available for cash. This is exactly where he found Shrem's bitcoin exchange to be helpful. The email exchanges between them revealed that both of them worked quite closely. However, Shrem had never met Faiella in person.

Shrem, who is just 24, had already become a major player in the world of Bitcoins. His BitInstant exchange, which is based in New York, allows people to locally buy bitcoins at around 700,000 locations in the nation. The company also allows people to buy bitcoins in Brazil, Russia and a few other countries. The company received an investment of around $1.5 million last year from Tyler and Cameron Winklevoss. Shrem is also the Vice Chairman of another big nonprofit corporation, Bitcoin Foundation.

Investors Shocked with the News

Reacting to this news, the Winklevoss twins mentioned that they were shocked by the arrest and are deeply concerned about Shrem. They mentioned that when they invested in the company for the first time in 2012, the management had committed to them that the company would abide by all the laws applicable on it. This included laws related to money laundering too. They said that they did not expect the company to be involved in such activities.

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