Published On: Fri, Dec 26th, 2014

Bitcoin Entrepreneur Charlie Shrem Sentenced to Two Years Behind Bars

Charlie Shrem

Charlie Shrem, former Bitcoin Foundation board member and CEO of the now-defunct exchange BitInstant, has been sentenced to two years in prison for helping users of the Silk Road website anonymously swap cash for digital currency, Engadget said.

Silk Road was the online marketplace infamous for hosting anonymous drug and gun sales that was busted by the FBI back in 2013. A version 2.0 went up shortly after that, but it suffered the same fate as its predecessor this November, the report said.

Based on evidence gathered during the crackdown, Shrem agreed to partner with Robert Mof Faiella to trade over $1 million in cash from buyers. Faiella was the one with direct contact to buyers, hiding behind the name BTCKing to post ads promoting his dollar-to-Bitcoin business on the marketplace, according to Engadget.

In court, Shrem’s lawyers tried to pin the blame on his youth – he was 22 at the time – and his desire to promote Bitcoin, but prosecutors claimed that the opportunity to make money drove the scheme. He pled guilty in September but tried to convince US District Judge Jed Rakoff not to lock him up, promising to make sure nobody follows in his footsteps, the report said.

However, Judge Rakoff, decided that a “substantial prison sentence” was needed to serve as a warning to other unlicensed money transmitting businesses. Also, he didn’t believe that Shrem was just “some kid making a one-time mistake” and determined that he “was knowingly, willfully, to some extent excitedly and even passionately involved in activities he knew were, in part, involved in serious violations of the law, ” said the report.

New York’s prosecuting attorney,  Preet Bharara wrote in his sentencing document that “the story of this case is not one of tragedy, but farce. Throughout the year 2012, Charlie Shrem made a mockery of the anti-money laundering laws he was responsible for enforcing, ” a report in Vocativ.com said.

Before Shrem’s arrest, he traveled around the country to speak on bitcoin panels and at conferences, and he would take any opportunity to speak live on camera to TV news crews reporting a bitcoin story. He even spoke at a Texas bitcoin conference—via Skype while under house arrest in his parents’ Brooklyn home, Vocativ.com said.

Despite Shrem’s initial efforts to convince the judge not to hand him a prison sentence, he told Bloomberg that things turned out better than expected. Two years, after all, is easier to digest than the six years prosecutors wanted him to spend in prison, Engadget said.

 

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