Shrem, known as one of the digital currency's most visible
promoters, is accused of conspiring with a Florida man, Robert
Faiella, to sell more than $1 million in bitcoins to the users of
Silk Road despite knowing that it would be spent on illegal uses
like drug trafficking.
Both Shrem and Faiella face charges of money laundering, conspiracy
and failing to file suspicious activity reports with government
banking authorities, according to the indictment filed by Manhattan
U.S. Attorney Preet Bharara.
Shrem's lawyer, Marc Agnifilo, and Faiella's lawyer, David Braun,
did not immediately respond to a request for comment on Monday.
Federal authorities shut down Silk Road last year, and prosecutors
from Bharara's office have charged Ross William Ulbricht with
operating the site under the name "Dread Pirate Roberts."
Shrem, 24, was arrested in January and stepped down as vice
president of the Bitcoin Foundation, a well-known trade group, soon
after. He was previously CEO of BitInstant, a bitcoin exchange
company that enjoyed financial backing from the twins Cameron and
Tyler Winklevoss but closed last year.
Bitcoin is a digital currency, not backed by any government or
central bank, that fluctuates in value according to its users'
demand. Users can transfer bitcoins to each other online and store
the currency in digital "wallets."
[to top of second column]
Authorities have vowed to pursue those who use bitcoin to complete
illegal transactions, while regulators are still grappling with
their approach to the nascent currency.
The recent failure of Japan's Mt. Gox, which filed for bankruptcy
after apparently losing hundreds of millions of dollars worth of
bitcoins, has underscored concerns about the currency's long-term
Shrem will be arraigned on the indictment on April 29, according to
Bharara's office. He faces a maximum prison term of 20 years if
convicted on the most serious charge.
(Editing by Eric Walsh)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.