Two BitCoin Operators Plead Guilty to Federal Charges for Illegal Money Transfer Business

Two major players in the BitCoin craze – a NYC-based BitCoin company, and a Florida-based BitCoin exchanger – have pleaded guilty to federal charges for operating unlicensed money transfer businesses, which allowed the internet currency to be funneled back into the black market website, the Silk Road.

Charlie Shrem, 24, pleaded guilty to federal charges for aiding and abetting the operations of an unlicensed money transfer business, and Robert Faiella, 54, pleaded guilty to the federal charge of operating an unlicensed money transfer business.

The two defendants face as much as 5 years in prison for their federal charges.

Investigation into the pair began when the government shut down the “Deep Web” site, The Silk Road, last year after bringing forth charges of murder-for-hire against the site’s founder, who also faces numerous federal charges for narcotics trafficking and prostitution. Both Faiella and Shrem came up as names who funneled funds back into the Silk Road through the internet currency, BitCoin.

“Working together, Shrem and Faiella exchanged nearly $1 million in cash for bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road,” the Justice Department said in a statement. The defendants allegedly ran a BitCoin exchange on Silk Road starting in 2011.

BitCoin is a form of alternative currency that was created in 2009. The currency is intentionally decentralized, so that money can be transferred directly from person to person, rather than through a bank. The currency’s worth fluctuates based on demand, which is calculated by a computer algorithm. There are no printed denominations of the currency, but many businesses in the US are beginning to accept BitCoin as payment.

Both also admitted that they knew illegal narcotics were bought and sold through the site.

“Robert Faiella and Charlie Shrem opted to travel down a crooked path — running an illegal money transmitting business that catered to criminals bent on trafficking narcotics on the dark web drug site, Silk Road,” U.S. Attorney Preet Bharara said in a statement. “The approximately $1 million in Bitcoins Faiella and Shrem sold to these outlaws cost them a lot more than they bargained for and bought them today’s convictions.”

“I knew that what I was doing was wrong,” Shrem said in the statement. “I am pleading guilty because I am guilty.”

The Strom Law Firm Can Help Defend Federal Charges

The law broadly defines wire fraud as devising or intending to devise a scheme to defraud others of money or property under false or fraudulent pretenses, representations or promises by means of electronic communications, or “wires.” Because they typically involve interstate matters, most wire fraud cases are considered federal crimes with convictions carrying heavy fines, prison sentences of up to 20 years, or both.

Our federal criminal defense lawyers handle cases involving:

• Fraudulent insurance claims
• Bond issuances and investment schemes
• Falsifying loan applications
• Check fraud schemes
• Bribes or kickbacks
• False advertising or misrepresentation in sales transactions
• making a false statement to a loan officer or bank official
• deceiving a bank
• falsifying loan documents
• check fraud
• forging check signatures
• ATM fraud
• Embezzlement
• And other federal charges.

If you, your loved one, or your corporation has been contacted by a law enforcement officer about federal charges, you should contact the Strom Law Firm, LLC immediately. The Strom Law Firm offers free, confidential consultations so you can discuss the facts of your case with impunity. Contact us today.803.252.4800