Bitcoiner Shrem a Tribeca Festival Star in Ankle Bracelet

Photographer: Gerard Til/Hollandse Hoogte via Redux
Charlie Shrem, co-founder and ceo of BitInstant.

Charlie Shrem will be a star at the Tribeca Film Festival, two weeks after his indictment on money laundering charges that could send him to prison for 20 years.

Shrem is scheduled to appear on a panel after today’s premiere of “The Rise and Rise of Bitcoin,” a documentary about the cryptocurrency’s journey from obscurity to notoriety. The 24-year-old got permission to leave his parents’ home in Brooklyn, where he’s confined under house arrest, and he’ll wear a court-monitored ankle bracelet to the event at the SVA Theater in Manhattan. He’s accused of conspiring to launder $1 million worth of bitcoins to help customers of the online Silk Road marketplace make illegal purchases anonymously.

“This will be a really big piece of history,” he said in a telephone interview, talking about the movie. The filmmakers “got everything at the perfect timing” in bitcoin’s short, turbulent history.

Is It Real Money If It Doesn't Come From the Mint?

The 95-minute documentary tells the digital currency’s tale through entrepreneurs such as Shrem and a cast of bitcoin enthusiasts, led by Daniel Mross, the brother of the director. It was Daniel Mross’s hobby as a bitcoin miner -- using computers to solve cryptographic problems to verify transactions and unlock new bitcoins -- that inspired Nicholas Mross to start making the movie two years ago, when he said there were “a lot of underground stories” about the money.

“We expected it to just still be a fringe thing when we were done that we could help explain to everybody, and it just kind of went crazy,” said Daniel Mross, 35, a programmer in Pittsburgh. “It was kind of a roller-coaster ride.”

Encrypted Transactions

The film traces bitcoin’s booms and busts and the emergence of entrepreneurs and investors, such as Erik Voorhees, co-founder of Coinapult, and Jered Kenna, co-founder of the San Francisco-based exchange Tradehill Inc., which suspended trading last year after banks closed its accounts. They’re expected to attend the sold-out premiere.

Bitcoin was under the radar for years after its open-source code was written by a mysterious programmer or group of programmers using the name Satoshi Nakamoto; the code was made public in 2009. Not tied to a central issuing or regulatory authority, the money relies on a public ledger to verify encrypted transactions. For years its main exchange was Mt. Gox, based in Tokyo.

The documentary’s filming started in May 2012 and ended last month, covering the currency’s highs and recent lows, including the arrest of Shrem, who was vice chairman of the Bitcoin Foundation trade group, and the collapse of Mt. Gox, which filed for bankruptcy after claiming to have lost coins valued at the time at more than $500 million.

Making Coffee

“It was difficult to figure out when we were done,” Nicholas Mross, 31, said. “As more and more things were happening in bitcoin, it was tough to decide.”

The final frames shot were of Dorian Nakamoto, a 64-year-old California engineer who was identified in a March 6 Newsweek article as bitcoin’s creator. He has denied the claim, and Newsweek has said it “stands strongly” behind its story.

For Shrem, the premiere will be a break as his criminal case proceeds. He intends to plead not guilty when he’s arraigned, according to his lawyer, Marc Agnifilo.

A third of the way into “The Rise and Rise of Bitcoin,” Shrem talks of his fear of going to jail as he wonders about the U.S. government’s reaction to the computer-driven currency. “It’s super-terrifying,” he says to the camera. “I don’t want to go to jail and I don’t want to become a martyr either.”

‘Frankly Scared’

He was taken into custody as he arrived at John F. Kennedy International Airport in New York on Jan. 26 after giving a speech about bitcoin in Amsterdam. Jailed for about 20 hours, Shrem said he learned to make coffee in his cell toilet and discussed economics with his guards.

He and a co-defendant are charged in an April 10 indictment with two counts of operating an unlicensed money-transmitting business, money-laundering conspiracy and willfully failing to file suspicious-activity reports with banking authorities. Silk Road customers used bitcoins as a venue to buy and sell drugs.

Asked if he had in fact ended up a martyr, Shrem said in the interview, “I am not dead, I am not in prison but I am definitely taking a hit. A lot of the information that they are using against me I voluntarily gave them. The case against me is very weak and will probably never even see a courtroom, but it is just the fact that I am a young kid and I am easily scare-able, and I am scared, frankly.”

Federal prosecutors at his bail hearing called Shrem a “bitcoin millionaire.”

‘Empty Island’

While Shrem declined to discuss the details of his case, he said that prosecutors “want to take down a lot of these early guys who are the biggest public figures for bitcoin.”

“Bitcoiners feel like they are fighting a war,” he said, “that they are like soldiers in an army.”

Shrem discovered bitcoins on a website in 2011, when he was a senior at Brooklyn College, Bloomberg Businessweek reported in April. He started BitInstant, which allowed customers to purchase the currency. Cameron and Tyler Winklevoss, who are seeking regulatory approval for a bitcoin exchange-traded fund, were among BitInstant’s investors.

Daniel Mross, a BitInstant customer, is shown in the documentary losing most of his bitcoins investing in mining equipment, though he declined to say how much that was. In the bitcoin world, “there is no too big to fail,” he said. But “there is something to be said for interacting in an economy with a lot of people willing to take risks, willing to fail and accept the consequences.”

Shrem said the currency would continue to develop.

“Satoshi gave us an empty island, he gave us the new world and we have to build the roads, bridges and tunnels,” he said. “Rome wasn’t built in a day but Rome is beautiful.”

To contact the reporter on this story: Anousha Sakoui in London at asakoui@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Anne Reifenberg, Stephen West

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