Silk Road Arrests: Bitcoin Dealers, BTCKing and Charlie Shrem, Charged With Money Laundering

Two Bitcoin dealers were charged with money laundering in connection to Silk Road. The United States Attorney’s Office alleges Robert Faiella, known as BTCKing, and Charlie Shrem, CEO and COO of a Bitcoin exchange company, attempted to sell more than $1 million in Bitcoins to Silk Road users, the online black market that sold illegal drugs, goods and services as well as legal goods.

New York U.S. Attorney Preet Bharara announced the charges on Monday. Faiella, 52, was arrested at his home in Florida while Shrem, 24, was arrested at the John F. Kennedy Airport in New York. Faiella and Shrem are charged with conspiring to commit money laundering and operating an unlicensed money transmitting business with an additional charge for Shrem for not filing a suspicious activity report over Faiella’s transactions.

Bharara said in a statement, “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 coopt new forms of currency for illicit purposes.”

According to the U.S. Attorney’s Office, Faiella was operating a Bitcoin exchange on Silk Road as the user “BTCKing” from December 2011 to October 2013. Faiella would get orders for Bitcoins, the only currency accepted on Silk Road, and would exchange cash for the cryptocurrency using the company where Shrem was the Chief Executive Officer and Compliance Officer. Faiella would then sell Bitcoins at a marked up price. Shrem knew Faiella was operating an illegal exchange service on Silk Road, even giving Faiella a discount for larger orders, but did not file a report with the United States Treasury Department. The U.S. Attorney’s Office states Shrem also helped Faiella avoid anti-money laundering laws. During the time they worked together, from August 2011 to around July 2013, Faiella exchanged more than $1 million in cash for Bitcoins with Shrem.

The conspiring to commit money laundering charge carries a maximum sentence of 20 years, the operating an unlicensed money transmitting business charge carries a maximum of five years and the failure to file a suspicious activity report also carries a maximum sentence of five years.

Silk Road was shut down in October 2013 and the site’s owner, Ross Ulbricht, was arrested. In the initial investigation, the FBI seized $3.6 million in Bitcoins and authorities later seized $28 million in Bitcoins belonging to Ulbricht. Bharara states the Silk Road investigation is ongoing.