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Crime Bitcoin The Almighty Buck

Bitcoin Exchange CEO Charlie Shrem Arrested On Money Laundering Charge 330

An anonymous reader writes "Charlie Shrem, the chief executive officer of bitcoin exchange BitInstant, has been arrested and charged with money laundering. 'In the federal criminal complaint, the Southern District of New York charges Shrem, the 24-year-old CEO of BitInstant, with three counts, including one count operating an unlicensed money transmitting business, one count of money laundering conspiracy and one count willful failure to file suspicious activity report. Robert Faiella, a Silk Road user who operated under the name “BTCKing,” was charged with one count of operating an unlicensed money transmitting business and one count money laundering conspiracy.'"
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Bitcoin Exchange CEO Charlie Shrem Arrested On Money Laundering Charge

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  • by Anonymous Coward on Monday January 27, 2014 @04:05PM (#46084189)

    I recommend reading the full complaint before quickly firing off a reply comparing Shrem to HSBC. Shrem was deeply involved in avoiding AML controls.

    Full complaint here:,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf

  • Re:HSBC (Score:3, Informative)

    by Ralph Wiggam ( 22354 ) on Monday January 27, 2014 @04:05PM (#46084193) Homepage

    HSBC was not a party to the money laundering. They were fined for insufficient oversight, which allowed other people to launder money.

    In this case, the guy is being charged with direct involvement in the money laundering.

  • by lxs ( 131946 ) on Monday January 27, 2014 @04:07PM (#46084229)

    Not really. he allegedly did some shady deals which he failed to report. [] So business as usual in financial circles except he got caught.

  • Faith (Score:1, Informative)

    by sjbe ( 173966 ) on Monday January 27, 2014 @04:14PM (#46084341)

    It's a competing currency. The marketplace says "we have no faith in your dollars.

    Nonsense. The marketplace has mostly yawned and ignored bitcoin - and rightfully so. There is plenty of evidence that the market has lots of faith in dollars and very little in bitcoin.

  • by Anonymous Coward on Monday January 27, 2014 @04:21PM (#46084445)

    Who the fuck is modding this moron up?

    Do you even realise this action agaist specific people who provided Bitcoin exchange services for Silkroad, not Bitcoin per se? Did you even read the complaint?

    It's not some vague accusation, the guy - who was in charge of money-laundering laws compliance - and his boss had pretty much literally talk like this: "Hey, this guy's from Silkroad, shall we ban him again?" - "He brings a lot of business" - "Maybe we should just drop an advertisement at Silkroad?" - "Just leave it like that".

    P.S.: It fucking says "Bitcoin is not inherently illegal and has many legitimate uses" as a part of explanatory paragraphs, FFS. OMG GUBMINT HAETS BITCOINS

    P.P.S: Read the complaint - it's plain English and quite readable.

  • Re:HSBC (Score:5, Informative)

    by pla ( 258480 ) on Monday January 27, 2014 @04:24PM (#46084493) Journal
    Cute, but did HSBC: Conspire to launder money? Willfully fail to file Suspicious Activity Reports(SAR)?

    Yes, actually, they did; and further, they actively conspired with Iran to circumvent international sanctions.

    And yet, we don't see any of their executives behind bars as a result...
  • by melchoir55 ( 218842 ) on Monday January 27, 2014 @04:44PM (#46084735)

    It actually does let you do stuff cheaper, faster, and safer. Cheaper because you don't have to pay money transfer fees. It is WAY faster than most forms of sending payment. It is also much safer insofar as a business cannot arbitrarily reverse the transfer.

    Crypto currency is clearly better. The problem is that bitcoin is abstract. Most people don't realize that the money system they are using has no underlying foundation. Those pieces have paper are valuable because people agree they are, not because they are backed by any product or valuable ore. Bitcoin is no different in that respect. Only, it is very clearly abstract while people are able to lie to themselves (or just be ignorant) about the US dollar. People are uncomfortable with bartering using stuff they thing is "worthless" (not backed by anything). Bitcoin hasn't hit the threshold of adoption which most people require to believe something is safe.

    This is entirely separate from all the other problems such as volatility, the 51% exploit, and etc.

  • by phantomfive ( 622387 ) on Monday January 27, 2014 @04:44PM (#46084739) Journal
    I'm not sure this is an attack on bitcoin itself, it looks like this is related to the Silk Road dragnet. We can expect to see more arrests related to Silk Road as the FBI goes through documents they've confiscated.

    All the same, if I were operating an exchange, right now I would be looking through and making sure I'm complying with the law exactly. Just like bankers do.
  • by Anonymous Coward on Monday January 27, 2014 @04:45PM (#46084761)

    Seriously, read the fucking complaint.

    They were operating fine with "AML controls", and would be still operating fine - just like any other fucking Bitcoin service that is not shut down by "jackbooted thugs stomping on little man" and all despite boldly operating in Totally-Sticking-It-To-The-Man currency - but they didn't even try to pretend they didn't know they're dealing with Silkroad.

    Yes, it's in there, with all the subpoenaed emails about how it's ok working with drug dealers, just tell them to keep it under reportable limit.

  • by Animats ( 122034 ) on Monday January 27, 2014 @04:46PM (#46084771) Homepage

    Mod parent up. A U.S. Senate commitee held a hearing on Bitcoin a few months ago. All the regulatory agencies were there.

    FinCen: We're watching it, no big deal.
    DEA: the big cartels aren't using it, the street dealers aren't using it.
    FBI: We took down Silk Road, which was using Bitcoin, and Bitcoin didn't make it harder to do that.
    Secret Service: No big deal.
    Homeland Security: terrorists don't seem to be using it.
    IRS: Taxable income is taxable income; we'll deal with it.
    SEC: Trading Bitcoin is just like trading anything else. We busted one guy running a Ponzi scheme with Bitcoins and the judge agreed that using Bitcoins didn't make it special.

    Conclusion of the Senate committee: no need for special Bitcoin legislation.

    All the US law enforcement action involving Bitcoins has been for doing routine crook stuff. Now, China is cracking down on Bitcoins, but they have exchange controls; you have to get permission to swap yuan for dollars or euros. The US has an open market in foreign currencies; you can swap dollars for yen without asking anyone's permission. There are reports to make to FinCen, but they just log the info.

  • Re:Faith (Score:2, Informative)

    by dkleinsc ( 563838 ) on Monday January 27, 2014 @05:06PM (#46085033) Homepage

    More to the point, the market has very good reason to have faith in dollars and very little in Bitcoin: Dollars are quite stable, and backed by one of the largest organizations of any kind on the planet. Bitcoins are extremely volatile, and backed by nobody. Which would you pick?

  • by sirwired ( 27582 ) on Monday January 27, 2014 @05:22PM (#46085201)

    The US Govt. literally Does Not Care what currency you use to transact your daily life. You can use USD, EUR, JPY, Gold, Seashells, whatever, or yes, BitCoins.

    As long as you pay your taxes, and, if operating a money transfer business (like a bank or currency exchange) you comply with a very long list of money laundering laws, you are in good shape. Ignore those laws at your peril.

    And complying with these laws is hard. Banks have entire large departments that do nothing but shuffle that particular bit of paperwork; it's not a trivial task, and .com entrepreneurs setting up shop from scratch are rather unlikely to get it right (Mt. Gox didn't), if they pay attention at all.

  • by drnb ( 2434720 ) on Monday January 27, 2014 @07:41PM (#46086611)

    Cheaper because you don't have to pay money transfer fees.

    In the U.S. consumers don't pay the transaction fees on credit and debit cards, and in many states merchants are prohibited from adding a surcharge to cover this fee or offering a discount for a cash transaction.

    Bitcoins only allow merchants to avoid the credit/debit transaction fee and receive a greater profit margin. Note merchants tend to convert bitcoins to USD immediately upon receipt, the fee for this conversion is usually far far lower than the credit/debit card fee. Sometimes even a flat fee for the month.

  • Re:HSBC (Score:4, Informative)

    by vux984 ( 928602 ) on Monday January 27, 2014 @09:45PM (#46087477)

    That's the inverse case. The government can take something illegal and make it legal retroactively and then let you get away with it. This is what happened with the telecoms. And while it wasn't all that good in this case, it is a good thing in general.

    The "bad" case is the opposite, where they make something legal illegal retroactively and then charge you for it. This would not be a good thing.

"I prefer the blunted cudgels of the followers of the Serpent God." -- Sean Doran the Younger