Charlie Shrem, BitInstant CEO arrested

It seemed that nothing can stop Bitcoins becoming even more popular. Last week, it has been reported that TigetDirect are now accepting Bitcoins as a legitimate currency for it's transactions. This has given a relatively high sense of authority for this type of crypto money. However, this could change as the news of Charlie Shrem, a 24 year old CEO, being arrested for money laundering, has hit the news headlines this morning. Charlie Shrem is thought to be associated to Silk Road, a black market online dealers, that leaders have also been arrested. U.S district attorney accused the BitInstant CEO of helping Robert Faiella, run an underground Bitcoin exchange market for the users of Silk Road.

Robert Faiella (alias BTCKing), who is now also under arrest, is thought to have laundered as much as $1 million with the help of Shrem. The later was arrested at JFK airport while trying to flee the country. Both are charged with conspiracy to launder money and unlicensed money transmitting business. Shrem also faces charges for not informing the authorities about the illegal actions taking place. Charlie Shrem is a big player in the Bitcoin market with BitInstant exchange offering more than 700,000 places to perform transactions. BitInstant received $1.5 million investment from Cameron and Tyler Winklevoss, who should now be regretting their decision.

IRS claim Charlie Shrem helped launder $1.05 million in bitcoins over a 10 months time

Here is what the investors, Winklevoss twins, had to say about the ongoing situation:

"When we invested in BitInstant in the fall of 2012, its management made a commitment to us that they would abide by all applicable laws - including money laundering laws - and we expected nothing less"

As the case suggests, Faiella first joined Silk Road in 2011, where he began exchanging bitcoins for real money. However, he could not do it by himself, therefore assistance of Shrem was needed. The BitInstant CEO started selling bitcoins to BTCKing that would end up in the hands of online drug buyers and sellers. The money the two men were making was not regulated by the Treasury Department. The case showed how in fact, the two men were close, by exchanging numerous emails, Shrem helped Faiella avoid a company that began investigating his large sums of deposits.

In 2013, BTCKing was exchanging more than $20,000 a week for the Silk Road drug dealers and buyers. Later that year, he decided to lay low for a while and pause their illegal business. The federal agents registered as fake Silk Road users and bought bitcoins from Faiella. Eventually, they led to Charlie Shrem and the whole fraud was unveiled. By busting Silk Road admins, the federal authorities were able to trace private messages and transaction information between the accused criminals. By Monday morning, the BitInstant site was down.

After the news, several authorities insisted on stronger regulations concerning bitcoins. The fact this crypto currency does not request any names and are difficult to trace, leaves quite a significant place for criminals to play in. Whether it's questionable if the bitcoin market will be strongly effected by the news, it is clear that the authorities will now take greater care to online money transactions.