Bitcoin backer Shrem pleads guilty to operating unlicensed payments

Charlie Shrem, a bitcoin entrepreneur, and Robert M. Faiella pleaded guilty before a New York court.

Bitcoin backer Charlie Shrem pleaded guilty Thursday of knowingly transmitting money intended to facilitate drug trafficking on the "Silk Road" online underground market, the U.S. Attorney's Office for the Southern District of New York said.

Shrem, a founder of the Bitcoin Foundation, is said to have been associated with Robert M. Faiella, who allegedly ran a Bitcoin exchange on the Silk Road from about December 2011 to October 2013, and went by the username BTCKing.

Silk Road, which was accessible only through the Tor anonymity service, used the anonymous bitcoin virtual currency to keep the identity of sellers and buyers private. Until its closure in October last year, Silk Road is alleged to have been a thriving market for drugs and other illegal products and services, including fake passports.

Faiella sold Bitcoins to users wanting to buy illegal drugs on the site, without registered his business as a money transmitting business with the U.S. Treasury Department, as required under U.S. federal regulations, according to government charges.

He filled the orders through a company in New York, which had Shrem as its chief executive officer and also its compliance officer, in charge of complying with federal anti-money laundering laws, from about August 2011 until about July 2013, when the company ceased operating. The statement from the U.S. attorney's office did not refer to the company's name "Bitinstant."

Both Faiella and Shrem pleaded guilty before District Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York for operating an unlicensed money transmitting business, through which they knowingly transmitted money intended to facilitate criminal activity -- specifically, drug trafficking on Silk Road, according to the U.S. attorney's office.

The lawyers for both Shrem and Faiella could not be immediately contacted. There was no record of the guilty pleas in the online records of the court.

Faiella and Shrem will be sentenced by Judge Rakoff next year on Jan 20. Shrem, who pleaded guilty to aiding and abetting Faiella in his unlicensed money transmitting business, carries a maximum sentence of five years in prison, as also Faiella who pleaded guilty to one count of operating an unlicensed money transmitting business.

Shrem quit as vice chairman of the Bitcoin Foundation in January after charges were brought against him by the U.S. attorney's office. The foundation, while accepting his resignation, quoted from the indictment which said that "Bitcoin are not inherently illegal and have known legitimate uses."

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags legal

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

John Ribeiro

IDG News Service
Show Comments

Cool Tech

Bang and Olufsen Beosound Stage - Dolby Atmos Soundbar

Learn more >

Toys for Boys

Sony WF-1000XM3 Wireless Noise Cancelling Headphones

Learn more >

Nakamichi Delta 100 3-Way Hi Fi Speaker System

Learn more >

ASUS ROG, ACRONYM partner for Special Edition Zephyrus G14

Learn more >

Family Friendly

Mario Kart Live: Home Circuit for Nintendo Switch

Learn more >

Philips Sonicare Diamond Clean 9000 Toothbrush

Learn more >

Stocking Stuffer

SunnyBunny Snowflakes 20 LED Solar Powered Fairy String

Learn more >

Teac 7 inch Swivel Screen Portable DVD Player

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Tom Pope

Dynabook Portégé X30L-G

Ultimately this laptop has achieved everything I would hope for in a laptop for work, while fitting that into a form factor and weight that is remarkable.

Tom Sellers

MSI P65

This smart laptop was enjoyable to use and great to work on – creating content was super simple.

Lolita Wang

MSI GT76

It really doesn’t get more “gaming laptop” than this.

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?