Bitcoin Group Says Shrem Quit Board After Arrest

Charlie Shrem quit the board of the Bitcoin Foundation after he was charged with conspiring to launder $1 million in the virtual currency, the latest allegations tied to the illicit online bazaar Silk Road.

Shrem, the chief executive officer of exchange company BitInstant, submitted his resignation from the board of the foundation effective immediately, Jinyoung Lee Englund, a spokeswoman for the group, said today in a blog post. Shrem, a prominent evangelist for Bitcoin, had been vice chairman of the foundation.

Shrem, 24, who was also charged with failing to report suspicious banking activity and operating an unlicensed money-transmitting business, might face more than 11 years in prison if convicted of the charges. He was freed on $1 million bond yesterday by a federal magistrate in Manhattan, who directed him to remain under house arrest at his parents’ Brooklyn, New York, home.

“We are both surprised and saddened to learn of these allegations,” Englund said. “The foundation does not condone illegal activities and values transparency, accountability and a high level of responsibility towards its members and overall community.”

The case against Shrem is the latest brought by Manhattan U.S. Attorney Preet Bharara stemming from the Silk Road probe. Investigators say the website was a marketplace for contraband including drugs and hacking software. Transactions were conducted using Bitcoins, prosecutors said.

‘Pirate Roberts’

Ross William Ulbricht was charged in October with running Silk Road under the alias “Dread Pirate Roberts.” In December, Bharara charged three more former Silk Road employees with helping run the website. All have pleaded not guilty in Manhattan federal court, where the cases are pending.

Also charged with Shrem this week was Robert Faiella, who is accused of being an underground Bitcoin exchanger tied to Silk Road. Shrem was accused of knowingly allowing Faiella to use BitInstant’s services to buy Bitcoins for Silk Road customers, and also of personally processing Faiella’s orders.

Jon Matonis, the foundation’s executive director, said in the statement that it was “mutually decided” Shrem should resign while his case is pending.

“We need to remain focused on our core mission to standardize, protect and promote the Bitcoin core product,” Matonis said. “While Charlie has contributed a great deal of personal effort and resources to enhance the adoption of Bitcoin worldwide, a prolonged legal dispute would inevitably detract from advancing that core mission.”

The case is U.S. v. Faiella, 14-MAG-00164, U.S. District Court, Southern District of New York (Manhattan).

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