Charlie Shrem, former vice chairman of the Bitcoin Foundation, and Bitcoin seller Robert Faiella have pleaded guilty to charges linked to the Silk Road website drug deals.
On Thursday, Sept. 4, at a Manhattan court, both Shrem and Faiella pled guilty to federal charges for operating an unlawful money exchange, which offered Bitcoins to those looking to procure illegal drugs via Silk Road.
Earlier in April this year, 24-year old Shrem and 54-year old Faiella were arrested and accused of money laundering as they unlawfully exchanged Bitcoins worth over $1 million with Silk Road customers, who they knew would use the currency to purchase illegal drugs, as well as other equipment via the site. Faeilla, who operated under the name BTCKing, would get Bitcoins via BitInstant and then sell them to users of Silk Road for a profit. Faiella also operated his business activities sans any registration.
According to federal authorities, Shrem was aware of Faeilla's illicit activities and allegedly gave him a discount for bulk Bitcoin purchase meant for Silk Road users.
"I knew that BTCKing was involved in transmitting funds that had been converted into bitcoins and were used on the website called Silk Road," Shrem revealed to Judge Jed Rakoff. "I knew that the business Silk Road was involved in was the buying and selling of narcotics."
Per the court documents, Shrem himself used the drug services of Silk Road. However, he has not been charged for purchasing the same.
"Robert Faiella and Charlie Shrem opted to travel down a crooked path-running an illegal money transmitting business that catered to criminals bent on trafficking narcotics on the dark web drug site, Silk Road," said Preet Bharara, Manhattan U.S. Attorney, in a statement. "The approximately $1 million in Bitcoins Faiella and Shrem sold to these outlaws cost them a lot more than they bargained for and bought them today's convictions."
Faeilla and Shrem's sentencing is slated for Jan. 20, 2015 and both face nearly five years in prison each.
