The CEO of BitInstant has been arrested for his alleged involvement in doing business with a scally-wag from the famed underground Silk Road drug website.
Charlie Shrem, CEO of the Bitcoin payment processor BitInstant and vice chairman for the Bitcoin Foundation, was taken into custody for allegedly working with an underground Bitcoin exchanger from Silk Road.* According to the US Department of Justice, Shrem allowed Robert Faiella (also known as BTCKing on Silk Road) to use BitInstant to run an ‘illegal’ Bitcoin exchange service through the now defunct Silk Road website.
A portion of the indictment against Shrem and Faiella reads:
“Not only did Shrem knowingly allow Faiella to [BitInstant’s] services to buy bitcoins for his Silk Road customers, he personally processed Faiella’s transaction, gave Faiella discounts on his high-volume orders, willfully 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 story is still developing, but it doesn’t help Shrem’s case as he also reportedly ordered some pot brownies from Silk Road during his stint with Faiella.
Bitcoin’s increasing presence in the global marketplace is not sitting well with regulators, but for many digital age entrepreneurs the decentralized currency might be the defining factor to jumpstart their business.
In the coming months, as authorities and regulators dive deeper into the Silk Road blacknet repositories, entities that are associated with or have done business with the underground website might be charged with criminal activities.* For Bitcoin users, the guilty-by-association issue may mean their Bitcoin processors and wallets may be at risk of getting shut down.
Greenberg (Usa vs Faiella-criminal Complaint)
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