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Dublin: 9 °C Friday 22 August, 2014

Bit-convicts? Online exchangers charged with money laundering

Robert Faiella, also known as ‘BTCKing’, and Charlie Shrem were arrested by DEA officers in Manhattan.

TWO OPERATORS OF BITCOIN exchanges have been arrested and charged with money laundering offences in New York.

Officers from the US States Attorney’s Office say that Robert Faiella, also known as ‘BTCKing’, and Charlie Shrem are accused of engaging in a scheme to sell over $1 million in Bitcoins to users of the online drug marketplace Silk Road.

The charges claim that the two men conspired to commit money laundering and operated an unlicensed money transmitting business.

Shrem is the CEO of Bitinstant and is also charged with willfully failing to report any suspicious activity regarding Faiella’s alleged illegal transactions. He was arrested yesterday at JFK Airport in New York while Faiella was arrested today at his residence in Cape Coral, Florida.

The charges against the two men were announced by Manhattan US Attorney Preet Bharara:

As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site, Silk Road. Truly innovative business models don’t need to resort to old-fashioned law-breaking, and when Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would co-opt new forms of currency for illicit purposes.

Silk Road

The allegations contained in the criminal complaint unsealed in Manhattan Federal Court today, claim that Faeiella operated on Silk Road under the name BTCKing and sold Bitcoins to users for cash currency, allowing them to then anonymously buy illegal drugs on the site.

He did this through a New York based company which of which the indictment claims Shrem was the CEO.

Special Agent at the US Internal Revenue Service Toni Weiraus said that the authorities have acted quickly to target the sale of illegal drugs online.

“The government has been successful in swiftly identifying those responsible for the design and operation of the ‘Silk Road’ website, as well as those who helped ‘Silk Road’ customers conduct their illegal transactions by facilitating the conversion of their dollars into Bitcoins,” he said.

The charges also say allege that Shrem personally bough drugs on Silk Road and was “fully-aware” that it was drug-trafficking website.

Expainer: Bitcoin or bit-con? Meet the crypto-currency that’s taking over the internet >

Read: Virtual insanity? Call for Central Bank to regulate BitCoin >

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