Charlie Shrem Bitcoin Arrest 02

Bitcoin Millionaire Charlie Shrem Arrested For Money Laundering, Drug Buying

Feds picked up Shrem, the CEO of BitInstant, at JFK

A month ago, I spent the evening drinking and hanging out with Charlie Shrem, the Bitcoin millionaire, at his nightclub in New York City.

Later in the the night, we went up to his apartment, where I spotted a couple of bongs. At some point, Shrem told me, “I won’t hire you unless I drink with you or smoke weed with you—that’s a 100 percent fact.” As a reporter, it’s always great to get quotes like these. You don’t hear too many CEOs talk about their love of weed. I stuck it in my story.

After Vocativ published my profile, which included a few mentions of the pot smoking, Shrem sent me a barrage of text messages, begging me to remove any mention of weed smoking. He claimed he no longer smoked weed, and that he was not a proud stoner. He told me it would end his career.

We refused his request, mostly because we didn’t think smoking weed was that big a deal. Plus, it was all true. He had mentioned pot smoking several times in our interview, all of them unprompted.

Now his paranoia makes a little more sense.

A coalition of U.S. prosecutors from the Drug Enforcement Agency, the Internal Revenue Service and the U.S. attorney general’s office arrested him today. The prosecutors allege that Shrem, along with a co-conspirator Robert Faiella, “schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site Silk Road.”

The arrest does not appear to be related to the October 2013 arrest of Ross Ulbricht—aka Dread Pirate Roberts—the alleged operator of Silk Road. But with the arrest of Shrem, it’s becoming abundantly clear that federal prosecutors are ramping up efforts to crack down on online exchanges where Bitcoin is the currency of choice.

(Vocativ / Dustin Drankoski)

According to the federal indictment, unsealed today, Robert Faiella ran an underground Bitcoin exchange on the Silk Road website. According to prosecutors, Faiella purchased Bitcoins from BitInstant, Shrem’s company, then resold them at a markup to his Silk Road customers. (Bitcoins were the only form of payment accepted on Silk Road.) Shrem is accused of knowingly facilitating, and even helping Faiella, in these transactions.

The indictment reveals a long list of serious federal offenses. First, that Shrem knowingly allowed Faiella to use BitInstant to buy Bitcoins for his drug customers. Shrem processed the accounts personally, and even gave him discounts on high-volume transactions. Essentially, the feds are alleging that Shrem knowingly used his company’s site as a money-laundering tool for drug dealers. It is somewhat ironic, then, that in addition to the role of CEO, Shrem was also the company’s chief compliance officer—the person directly responsible for making sure the site was not used for money laundering.

Although we’re likely weeks away from trial, the indictment is a good indicator for law enforcement’s strategy on fighting online drug dealing. Rather than targeting individual drug dealers, who are often difficult to find, law enforcement will likely continue to target the consumer-facing exchanges and the people behind them, which are much easier to investigate.

Frankly, their tactic shouldn’t be much of a surprise. Money exchanges are ripe for fraud and money laundering. (PayPal, for instance, has been the subject of many federal investigations.)

What is rare, however, is to see the founder and CEO of a consumer-facing exchange not only to be complicit with the laundering—but also appearing to encourage it.

Shrem, we should note, is also accused of buying drugs on Silk Road in the indictment. So much for his claims about not smoking weed.

Respond Now
  • How and the hell did we let this corrupt gov’t have this much control it’s a joke democracy does not exist in America only corporate fascists the only thing tha will right the ship is a revolution

  • I bet all the people who are whinging about this are drug users themselves…. The fact remains that he was caught doing illegal stuff, people shouldn’t ignore that, (though some may try to ;) ).

  • He is not guilty come on america save him . Goverment just want control bitcoin and make it forbidden like that .they give people scare . If you use bitcoin we charge you as money laundering ….Its not fair ..I blame who is behind this happen in goverment . Mr Bernanke ?

  • This reporter did the right thing!  Those of you who vilify him for not protecting Shrem would be the first to scream if he protected someone you don’t like.

  • Wow- way to be proud of using someone’s good-faith comments to you just to get attention.You’re a POS wanna-be “journolista”.You probably just lost three times as many fans as you gained.

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  • The reporter is a douce bag for defaming the man.

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    • hcorrection. Douche bag

  • The CRIMINALS at the DEA need to be arresting THEMSELVES, just named as the biggest DRUG RUNNERS OF ALL!  They’re just mad because someone invented something they can’t get their filthy hands on.

  • Two things it seems like the reporter acted as a police informant in this matter getting their foot in the door with the weed And second he would had never gotten in trouble unless he was taking profits from the u.s. govt that brings in the drugs and the big banks that launder said funds

  • The Fair Tax solves the problem of taxation on ill gotten gains.

  • HSBC just got fined for laundering 1.8 trillion in drug money. No one got arrested there. Why? We need to realize who the real criminals are. The DEA, CIA, and the bankers are the biggest drug dealers there are.

  • The government just want an excuse to steal the bitcoins to enrich themselves.

  • And another pyramid sscheme comes to a close. Shame, great idea, lousey FTARD at the helm.

  • The Federal Government has become the biggest thug in the world!  The Administration is the most corrupt and is led by criminals and the millions of government workers just do as they are told to do.  The voters need to clean house in Washington DC and in certain states that are governed by little dictators (like NY, for instance).  

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    • Thug feds destroy Bitcoin just like they did the Liberty Dollar.

  • There are enough laws on the books to make all of us criminals. Obama/Holder gestapo practices are now in full swing…Vallerie Jarrett:Nov 5th, 2012 “After we win this election, it’s our turn. Payback time. Everyone not with us is against us and they better be ready because we don’t forget. The ones who helped us will be rewarded, the ones who opposed us will get what they deserve. There is going to be hell to pay. Congress won’t be a problem for us this time. No election to worry about after this is over and we have two judges ready to go.”

  • Gee obama and holder looked the other way for Washington and Colorado I betthis has nothing to do with weed I bet it is more like where is our share of Bitcoin we need money so folk it up.

  • “So much for his claims about not smoking weed.”So, he’s guilty until proven innocent?

  • Bankers hate bitcoin so gov sends in the goons… don’t you think this has everything to do with discrediting bitcoin and the “kind” of people who are involved…? blackball propaganda…most likely.

  • Ask the DEA why the Sinaloa cartel is allowed to distribute cocaine in the USA without zero fear of prosecution and why  Chicago is their #1 drop zone, under the watchful eye of The presidents ex  advisor? All these government people are corrupt.

  • The president of the USA became the most powerful man in the world because he smoked pot, which he proclaimed in his own words consumed his life at the most critical stage of his existence, proving marijuana use is required for preeminent status.

  • you will not be able to buy or sell. The Mark of the Beast16 And he causes all, the small and the great, and the rich and the poor, and the free men and the slaves, to be given a mark on their right hand or on their forehead, 17and he provides that no one will be able to buy or to sell, except the one who has the mark, either the name of the beast or the number of his name. 18Here is wisdom. Let him who has understanding calculate the number of the beast, for the number is that of a man; and his number is six hundred and sixty-six.

  • Yet Wachovia can launder $400,000,000,000 in drug money, admit it and nobody goes to jail… The banks are threatened by Bitcoin and several big banks met in California to discuss Bitcoin… Now a Bitcoin related arrest? We need a free autonomous country built on Bitcoin…

  • Sounds like he’s not very smart.

  • I think the crooked Obama machine is behind the arrest. Million dollar vacations for punched face looking michelle lo-BoMamma and their naive following of whatever’s think they care about the poor. Thank god it’s almost over, and if he thinks he can pull a Putin and stay in power… Let’s just say that WILL wake up the sleeping dog.

    2 Replies - Reply Now
      • Yes yes Yes
    • Thumbs Up!

  • I would disagree with the claim in the story that it is easier for law enforcement to go after money launderers rather than trafickers.  It is actually much more difficult, because they have to prove the drug connection plus the money laundering. It’s a lot easier to just catch the guys with the drugs, because there is a lot of physical evidence and the burden of proof is much less/simpler.

  • too fast, too furioys.

  • The Ob*ma Regime arrests a former Virginia governor on bogus charges.  The Ob*ma Regime arrests one of its biggest critics, Dinesh DSouza on BS campaign fraud charges.Now the Ob*ma Regime arrests a Bitcoin millionaire on trumped up charges.The Ob*ma Regime won’t prosecute black hoodlums who play the “knockout game” but it is prosecuting a white hoodlum for the same thing.The Ob*ma Regime is using the IRS to persecute Conservative groups.Don’t you liberals who voted for Ob*ma finally see that he has become a tyrant who persecutes his political enemies — far, far, far, far worse than Nixon ever could think of doing?

    1 Reply - Reply Now
    • Settle down Beavis…..

      2 Replies - Reply Now
      • At least he’s paying attention butthead

      • Randy I’ll ssume that you are government educated “Lo Vo” (low information voter)!

  • But as for me, give me liberty or give me death.Nathan Hale

    2 Replies - Reply Now
    • We must come out and defend this country from the Obama crooks, I second your statement GIVE ME LIBERTY OR GIVE ME DEATH !!!

    • “Give me liberty, or give me death.” – Patrick Henry”I regret that I have but one life to lose for my country.” – Nathan HaleAGTH

  • Wow, you suck as a person. The Media is the fourth branch of government.

  • If the guy was stupid enough to tell a reporter he smokes weed and lays it on the line that he won’t hire anyone that doesn’t smoke or drink with him, then he is a tard, plain and simple.. he deserves what he gets.

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    • Or he is a normal citizen of Washington State.  Seems like a smart way to filter out the squares and narcs.

      1 Reply - Reply Now
      • Oh, more than that, to get the someone to drop their inhibitions and reveal more of themselves.  

  • Whoa! Duuude! R U sayin’ that some dude that’s into weed and stuff and helps out his dealer and all is …oh look …a leaf.

  • Last names………..anyone care to say what the common denominator is? anyone? anyone?

  • You can’t get in trouble for keeping your mouth shut. Simple really.

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    • When I see evil, I shout.  First Amendment: use it or lose it.

  • He made 1 mistake: he talked to a reporter.

  • So you smoked his weed and then sold him out. You suck.

    1 Reply - Reply Now
    • Yes what a creepy stool pigeon…smoked some weed…OOOOOOO how horrible..

  • The one that looks like a major sleazebag after this is Eric Markowitz… easy name to remember to never speak to.

  • wow what happened to the days when the press was honorable and had some dignity and it wasnt all about ratting someone out? and they wonder why no one trusts them. discretion is the better part of valor.

  • Socialist Left Coast + BitCoin = Derp.

  • Shrem’s first mistake was living in New York, his second was talking to the press.

  • Good going Markowitz.  See how many new open and honest interviews you get from anyone of interest.  There was a far better way for you to handle all of this, unfortunately your out of control ego is doing your thinking.

  • Wow. It’s good to know that Eric Markowitz is someone you can’t trust. “We didn’t think smoking weed was a big deal.” Well, guess what, Eric, to the government it is and people are being thrown in cages for it across the nation. It disturbs me that, after someone who was kind enough to give you an interview, asks you to remove content, you just ingore him.What a low life. I hope you live with this guilt for a long time.

  • This is nonsense. It is time to end the war on drugs and to abolish the criminal IRS.

  • Stupid stoner.

  • End the war on drugs.  This stuff is nonsense.

  • I wish someone would go in and arrest all these high up gov officials. Who only go after people, that are not “playing ball with them”. In other words if they aren’t getting kick backs, then how dare you break the law? Obama’s admin is far more corrupt that Nixon’s but Obama is a Dem and a media darling so nothing will ever happen. When the media says, “he gives me a shiver up my leg” how can we expect them to be objective in the slightest. All the MSM stories are so clearly biased that I can’t stand to watch or read the news any longer.

    1 Reply - Reply Now
  • Ha, Ha, how funny.Everyone knows the govt runs the drug trade since Iran Contra, or well before.We need to stop funding this govt corruption with our income taxes. Here’s the real US income tax law:-Exempt income, 26 CFR 1.861-8T(d)(2)(ii)-Income that is not exempt, 26 CFR 1.861-8T(d)(2)(iii).Source: ecfr dot govSource: what is taxed dot (com)According to US tax law, most Americans don’t owe any income tax. Of course, the perps in govt – including tax court judges whose paycheck depends on this govt tax scam – will say Sec. 861 is frivolous, YET THERE IT IS, definition of Exempt income, and the list of taxable income (income not exempt) is codified in Sec. 861. Government  = PoliticianPolitician = Liar

  • He should made a donation to Obama and given him some free weed.  Then he would be immune like all of Obama’s friends in Hollywood.

    1 Reply - Reply Now
    • LOL. You KNOW this guy and his friends are Obamabots. They voted for these lunatic wannabe tyrants. Probably donated to them too. Put down the bong and do your research before you vote for power-hungry psychopaths.

  • BS. A majority of Americans support legalization of weed.  It’s legal in Oregon and Colorado for recreational use and for medicinal purposes in other states.  Silk Road was simply providing a badly needed service.  In 10 years, it will seem absurd to have prosecuted these guys.

  • I feel dirty

  • Funny how journalists jump all over business mens’ flaws. Then, these same journalists hide pot smoking, cocaine sniffing, johnson sucking activities of our Commander in Chief.

    1 Reply - Reply Now
    • Not funny at all!!! Criminal I would say but the musloom commie in the WH will never be held accountable until the Lord’s judgement day.

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