Two Bitcoin operators charged in N.Y. ‘Silk Road’ bust

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NEW YORK (AP) — The top executive of a Manhattan-based
Bitcoin company and a Florida Bitcoin exchanger have been charged with
conspiring to commit money laundering by selling more than $1 million in
Bitcoins to users of the black market website Silk Road, which let
users buy illegal drugs anonymously, authorities said Monday.
Charlie
Shrem, 24, the chief executive officer of BitInstant and vice chairman
of a foundation that promotes the Bitcoin currency system, was arrested
Sunday at New York’s Kennedy Airport while Robert Faiella was arrested
Monday at his Cape Coral, Fla., residence, prosecutors said in a news
release. Federal prosecutors in Manhattan said Shrem personally bought
drugs on Silk Road and was fully aware that it was a drug-trafficking
website.
Shrem’s defense attorney did not immediately return a
message seeking comment ahead of a court appearance scheduled for
Monday. It wasn’t immediately clear who would represent Faiella in
court.
Authorities have said Silk Road’s San Francisco operator
generated more than $1 billion in illicit business from January 2011
through September on the website, which used the tough-to-track digital
currency called Bitcoin before it was shut down.
U.S. Attorney
Preet Bharara said Faiella and Shrem conspired to sell more than $1
million in Bitcoins to criminals who wanted to sell narcotics on Silk
Road between December 2011 and October.
"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," Bharara
said.
James J. Hunt, acting head of the Drug Enforcement
Administration’s New York office, said the defendants were "hiding
behind their computers" as they earned substantial profits by
facilitating anonymous drug sales.
According to prosecutors,
Faiella operated under the name "BTCKing" as he ran an underground
Bitcoin exchange on the Silk Road website, where Bitcoins were the only
form of payment accepted.
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