Bitcoin Promoter Gets 2 Years for Silk Road Transfers

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Charlie Shrem
Charlie Shrem, the former Bitcoin Foundation Inc. executive. Photographer: Astrid Stawiarz/Getty Images for the 2014 Tribeca Film Festival

Charlie Shrem, the former Bitcoin Foundation Inc. executive who pleaded guilty to charges tied to the illicit online bazaar “Silk Road,” was sentenced to two years in prison by a judge who rejected his bid to remain free and “change the world.”

Shrem, 25, a prominent evangelist for the virtual currency, admitted in September to helping send money on behalf of an operator of an illegal bitcoin exchange called BTCKing. He faced as long as 71 months in prison under federal sentencing guidelines, according to a report by U.S. probation officials. His lawyer, Marc Agnifilo, asked for probation.

In Manhattan federal court today, Shrem quoted Spider-Man and said he wanted to remain free to make sure others don’t commit crimes using the virtual currency he described as his “baby.”

“I screwed up,” Shrem told U.S. District Judge Jed Rakoff. “The bitcoin community, they’re scared and there is no money laundering going on any more. They’re terrified. Bitcoin is my baby, it’s my whole world and my whole life, it’s what I was put on this earth to do. I need to be out there. If your honor grants me that, I can be out there in the world, making sure that people don’t do the same stupid things that I did.”

Assistant U.S. Attorney Serrin Turner disputed Agnifilo’s argument that Shrem’s crimes were a momentary youthful lapse. He said federal investigators inadvertently stumbled upon Shrem’s case after a related probe, while explaining that such cases are hard to prosecute with limited resources.

“Unless these businesses get the message that these laws are not a joke, the court will lose a valuable opportunity to help promote the legitimacy of the these businesses,” he said. “There needs to be a substantial prison sentence.”

Serious Crime

Rakoff, who ordered Shrem to forfeit almost $1 million, said he committed a serious crime and that a prison term is warranted.

“There’s no question that Mr. Shrem, over a period of many months, was knowingly, willfully, to some extent excitedly and even passionately involved in activities he knew were, in part, involved in serious violations of the law,” the judge said.

The case is part of a crackdown by Manhattan U.S. Attorney Preet Bharara on Silk Road, a sprawling and anonymous black market bazaar. Bharara has previously charged Ross William Ulbricht with running the $1.2 billion Internet marketplace under the alias “Dread Pirate Roberts.”

Both Shrem, who was vice chairman of the Bitcoin foundation, and Robert Faiella, who operated the BTCKing exchange, were charged in April with a scheme to launder more than $1 million in the virtual currency tied to transactions on Silk Road. A trial was scheduled to begin this month.

Faiella also pleaded guilty to running an illegal money business and awaits sentencing.

Shrem, who was also chief executive officer of a Bitcoin exchange called BitInstant, was arrested in January when he arrived at John F. Kennedy International Airport in New York after giving a speech in Amsterdam about bitcoins.

Ulbricht, who pleaded not guilty, is scheduled to go to trial in January.

Shrem was allowed to surrender to federal prison in March. He left the courthouse accompanied by his family, and stopped to say he was relieved with the term he received.

“Justice has been served,” Shrem said in an interview. “They were trying to put me away for more than six years, which would have been unfair. I think it turned out alright.”

The case is U.S. v. Faiella, 14-cr-00243, U.S. District Court, Southern District of New York (Manhattan).

(Corrects headline to refer to money transfers in story published Dec. 19.)
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