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Locked Up: Bitcoin Exchange CEO Arrested For Money Laundering

bitcoin-exchange-ceo-arrestedU.S. government agents have arrested Charlie Shrem, the CEO of Bitcoin exchange BitInstant, charging him with laundering money for customers of online drug bazaar Silk Road.

The U.S. attorney in the Southern District of New York said Shrem helped someone he hadn’t met in person, Robert Faiella, sell more than $1 million worth of bitcoins to Silk Road customers. Faiella, a 52-year-old Florida man, allegedly ran an underground Bitcoin exchange using the alias BTCKing.

Shrem was arrested at John F. Kennedy International Airport in New York on Sunday, and Faiella was arrested at his home in Cape Coral, Fla., on Monday, prosecutors said. Both are charged with conspiracy to launder money and operating an unlicensed money transmitting business. Additionally, Shrem faces a charge for not tipping off the feds to what was allegedly going on.

Shrem, 24, is a major player in the Bitcoin world. The BitInstant exchange, based in New York City, lets people buy bitcoins locally at more than 700,000 locations in the United States, as well as Brazil, Russia and elsewhere. It received a $1.5 million investment last year from Cameron and Tyler Winklevoss. Shrem is also vice chairman of the Bitcoin Foundation, one of the currency’s biggest advocates.

Monday’s news is the latest in the Silk Road bust that began in October with the arrest of the website’s alleged founder. Federal agents managed to track down the website’s server, which housed transaction information and private messages. Some of that information was used as part of the Shrem and Faiella arrests.

BitInstant’s website was down Monday after the announcement by federal law enforcement.

Several lawmakers have called for increased regulation of Bitcoin in light of the currency’s heightened privacy, given that they can be traded without using names and are difficult to trace to an individual.

source: cnn.com

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