LeapRate's Daily Forex Industry Newsletter
Join now to receive first access to our EXCLUSIVE reports and updates.
Screenshot of a breaking news alert e-mail from Q2 2017
The woes facing virtual currency traders following the closing down of anonymous marketplace Silk Road continue, despite more than a year having passed since its fate at the hands of US federal law enforcement agencies which closed it down due to the ease of committing illicite trade via the site.
The most recent casualty is Charlie Shrem, who has been sentenced to two years in jail for indirectly helping retail customers swap cash for Bitcoins on the Silk Road marketplace.
Mr. Shrem, who is notable for having co-founded the now defunct startup company BitInstant, is a founding member of the Bitcoin Foundation, and formerly served as vice chairman. Having graduatef from Yeshiva of Flatbush and Brooklyn College, his alma mater in Science in Economics and Finance led him to entrepreneurial enterprises in virtual currency technology.
An early investor in Bitcoin, Mr. Shrem initially lost his original investment which he made in 2011, however in conjunction with business partner Gareth Nelson, Mr. Shrem’s technology firm BitInstant received $125,000 from angel investor Roger Ver, and, in the fall of 2012, $1.5 million from a group of investors led by Winklevoss Capital Management. By 2013, BitInstant was processing approximately 30% of all Bitcoin transactions. BitInstant operated from September 2011 until July 2013, when it became insolvent.
On January 26, 2014, upon returning to New York from an e-commerce convention in Amsterdam, Mr. Shrem was arrested at JFK Airport in New York, and prosecutors alleged that Mr. Shrem and associate Robert Faiella conspired to launder $1 million worth of Bitcoins to help users of the Silk Road marketplace anonymously make illegal purchases. Mr. Shrem was also charged with failing to report suspicious banking activity and operating an unlicensed money-transmitting business.
In handing Mr. Shrem’s sentence down, the Judge explained that Mr. Shrem was not “some kid making a one-time mistake” but had “excitedly” helped Mr. Faiella get access to Bitcoins. Mr. Faiella is due to be sentenced in late January. He has pleaded guilty to running an unlicensed money transmitting business.
Mr. Shrem’s sentence also includes forfeiting $950,000 to the US government. Mr. Shrem was not directly involved with the Silk Road marketplace but was charged because of his association with Mr. Faiella who set up an exchange that let the marketplace’s customers swap cash for Bitcoins. The virtual cash was the only form of currency accepted on the Silk Road, effectively making this a money laundering matter.
Lawyers working for Mr. Shrem said his involvement stemmed from his interest in bitcoins rather than the Silk Road. The two year sentence is less than government lawyers sought who said he should face 57 months in jail.
The operator of the Silk Road marketplace, Ross Ulbricht, is due to face trial in January. He has pleaded not guilty to charges of dealing drugs and conspiracy.
Latest research from Andrew Saks-McLeod (see all)
- FINRA Fines Goldman Sachs Execution & Clearing, L.P. $1.8 Million for OATS and trade reporting failures - July 27, 2015
- Full details of Malta’s new binary options regulation - July 27, 2015
- CMC Markets takes to the high seas at the Americas Cup – Live coverage from Portsmouth, UK - July 27, 2015
- One Financial Markets expands UAE operations with senior appointments and new offices - July 27, 2015