BitInstant’s CEO Charlie Shrem Charged With Money Laundering Activities In United States

BitInstant’s CEO Charlie Shrem Charged With Money Laundering Activities In United StatesBitcoins recently witnessed an interest and craze of mass scale. Individuals and companies around the world started exploring Bitcoins as a potential and remunerative investment without considering its volatility and possible legal challenges. Naturally, governments around the world started targeting Bitcoins and their dealings in an illegal manner. Some countries totally banned Bitcoins whereas other shave issued warnings and precautions against their uses.

Meanwhile, businesses tried to make Bitcoins a part of their dealings. For instance, hotels, casinos, online gaming websites, salons, restaurants, etc have started accepting Bitcoins as a mode of payment for their services. However, this is a risky proposition and it may also bring civil and criminal charges against those accepting and giving Bitcoins. This is because the legality of Bitcoins is still not clear in many jurisdictions.  Even the Bitcoin exchanges and Bitcoins websites operating in India must comply with Indian laws to be legal.

It has been reported by Washington Post that Charlie Shrem, the CEO of Bitcoin exchange BitInstant, has been charged with money laundering. A press statement (PDF) from U.S. prosecutors in Manhattan said that Shrem knowingly facilitated illegal purchases on the now-shuttered underground drug marketplace Silk Road. According to the government, a man named Robert Faiella worked with Shrem to sell Bitcoins to Silk Road users. The two men allegedly sold more than $1 million worth, with Shrem giving Faiella a volume discount on BitInstant’s fees.

“Upon receiving orders for Bitcoins from Silk Road users,” the government said, Faiella filled the orders through BitInstant, which “was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service.” According to the government, that runs afoul of U.S. money laundering laws, which require payment companies like BitInstant to collect information about their customers, monitor their transactions, and report “suspicious” transactions to the government. Shrem failed to do this, the government says. Faiella is also facing charges.

In India, the RBI cautioned users of virtual currencies against various risks. These include legal risks as well. Meanwhile, the Enforcement Directorate (ED) searched two Bitcoins websites and their offices. ED believes that Bitcoins can be used for Hawala transactions and funding terror operations. In the present non compliance environment and increasing Bitcoins frauds and crimes, more such searches and arrests are anticipated in India and other parts of the world.