2 Bitcoin operators plead guilty in Silk Road case

Published on NewsOK Modified: September 4, 2014 at 5:54 pm •  Published: September 4, 2014
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NEW YORK (AP) — The top executive of a New York City-based Bitcoin company and a Florida Bitcoin exchanger pleaded guilty Thursday to federal charges, admitting that they enabled the digital currency to be funneled to the black market website Silk Road.

Charlie Shrem, 24, of Manhattan, pleaded guilty in federal court there to aiding and abetting the operation of an unlicensed money transmitting business, while Robert Faiella, 54, of Cape Coral, Florida, pleaded guilty to operating an unlicensed money transfer business.

Sentencing was set for Jan. 20, when each faces as much as five years in prison.

The case grew from the government's shutdown of Silk Road. Shrem was chief executive officer of BitInstant; Faiella operated an unlicensed money transferring business.

They were accused of letting more than $1 million in Bitcoins reach the website. Both admitted during their pleas that they knew narcotics were bought and sold on the website.

U.S. District Judge Jed S. Rakoff asked Faiella whether he knew from December 2011 through last October that his Bitcoins would be used to buy and sell drugs and that it was illegal.

"Absolutely," Faiella answered.

Shrem said he knew that much of the business conducted on Silk Road involved the purchase and sale of narcotics.

"I knew what I did here was wrong," he told Rakoff.

Authorities have said Silk Road's San Francisco operator generated more than $1 billion in illicit business since 2011 on the website. It used Bitcoin, a tough-to-track digital currency, before being shut down.

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