Published On: Sat, Dec 20th, 2014

Illicit Transfers Send Bitcoin Backer to Prison for Two Years

The staunch supporter of Bitcoin operations, Charlie Shrem, has been sent to two years imprisonment for helping to send $1 million digital currency to Internet black market bazaar Silk Road indirectly. Shrem is the former Vice Chairman of Bitcoin Foundation.

He has also been ordered by the U.S. District Judge Jed Rakoff to pay $950,000 after pleading guilty in September. The Manhattan District Judge said that he was responsible for aiding and supporting unlicensed money transmitting business and was someone who was actively involved in conducting a novel crime that used Bitcoins to carry out drug sales. The Judge also said that the 25 year old Shrem was not a kid who was making a one-time mistake.

Illicit Transfers Send Bitcoin Backer to Prison for Two Years

The Judge said that he was very much involved in drug trafficking and controlling it and his innovativeness of using Bitcoins for this purpose cannot be allowed at all. Shrem faced up to a five years imprisonment as the probation officer of the court recommended a 57 month term. But, Shrem’s lawyer argued for probation, saying that his case has already sent shivers in the minds of the Bitcoin community and they now have read the message loud and clear.

Shrem told the Judge that no one is now involved in Bitcoin any more as they are all terrified about the situation that he was in and there is no money laundering now. Shrem was charged in January for his illegal transactions using Bitcoin after an investigation was conducted into Silk Road. This is an online marketplace that accepted Bitcoins to carry out illegal drug trade as well as other illicit goods and services. The US authorities had seized the marketplace in October 2013.

Shrem’s lawyers told court that Shrem was not interested in promoting the Silk Road website and had only strong desires to promote Bitcoin digital currency. This led to him in helping out an underground Bitcoin exchanger Robert Faiella from Florida to trade over $1 million in cash in exchange of Bitcoins in 2012 and these were later sold to Silk Road customers.

The prosecutors said that Shrem was intent on just making money and he had also told his then business partner not to ban Faiella as a customer as he had made the Bitcoin Foundation earn a very good profit. Shrem quit from his Vice Chairman post at the Bitcoin Foundation after he was charged for illegal money laundering. Faiella will be sentenced on the 20th of January 2015.

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