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Bitcoin Exec To Spend Two Years Behind Bars For Silk Road Transactions

Posted by samzenpus on from the end-of-the-road dept.

mrspoonsi writes Charlie Shrem, former Bitcoin Foundation board member and CEO of the now-defunct exchange BitInstant, has been sentenced to two years in prison for helping Silk Road users anonymously swap cash for digital currency. Silk Road, as you know, was the online marketplace infamous for hosting anonymous drug and gun sales that was busted by the FBI back in 2013. A version 2.0 went up shortly after that, but it suffered the same fate as its predecessor this November. Based on evidence gathered during the crackdown, Shrem agreed to partner with Robert M. Faiella to trade over $1 million in cash from buyers. Faiella was the one with direct contact to buyers, hiding behind the name BTCKing to post ads promoting his dollar-to-Bitcoin business on the marketplace.

69 comments

  1. Sorry, not corporate enough. by Anonymous Coward · · Score: 5, Insightful

    If he worked for HSBC, he wouldn't even have been charged.

    1. Re:Sorry, not corporate enough. by __aaltlg1547 · · Score: 1

      If that and he had been dealing in illegal drugs... yes, he would have been charged. What, nothing on the attempting-to-hire-a-hitman?

    2. Re:Sorry, not corporate enough. by LoRdTAW · · Score: 2

      Sorry, not corporate enough.

      More like the corporate types don't like competition.

      If he worked for HSBC, he wouldn't even have been charged.

      Yea. Because same team.

    3. Re: Sorry, not corporate enough. by bill_mcgonigle · · Score: 5, Informative

      You're probably unaware that the GP specifically used 'HSBC' because they were caught laundering trillions of dollars of drug money and nobody was indicted. It's no crime to be ignorant of such things, but just try not to hold any policy positions on the subject.

      --
      My God, it's Full of Source!
      OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
    4. Re: Sorry, not corporate enough. by IamTheRealMike · · Score: 3, Informative

      You're probably unaware that the GP specifically used 'HSBC' because they were caught laundering trillions of dollars of drug money and nobody was indicted.

      He probably isn't unaware of that. He may well have actually read the indictment itself or a detailed summary of it, which made clear that the US case was very weak to the point of hardly working at all. In particular, not only did they fail to clearly establish that drug money was really moving (their case was "there is so much cash, some of it must be from cartels") but in particular they failed to show intent by HSBC execs to help drug cartels. Actually their case boiled down to HSBC didn't try hard enough, they weren't suspicious enough, etc. (I'm ignoring the Iranian transactions here which gets into issues of international jurisdiction, as you only brought up drugs).

      The reason you think the are guilty is twofold. Firstly US anti money laundering laws are unbelievably extreme. The PATRIOT Act removed the need to have intent to be found guilty of money laundering. Bankers can now be found guilty of AML violations even if they genuinely tried hard and had no intent to break the law. Hence the accusations from the DoJ that were of the form "HSBC should have designated Mexico as high risk", etc. Secondly as part of the plea agreement HSBC had to act guilty and accept whatever the DoJ said about them. So you only heard one side of the story, the prosecutions side (except there was no court case). No surprises that you think the whole thing is cut and dried.

      It's no crime to be ignorant of such things, but just try not to hold any policy positions on the subject.

      Given that there was never any court case and HSBC was never able to defend themselves, pretty much everyone is ignorant in this case because we never heard the full story. But I'm pretty sure if DoJ had emails from HSBC execs that looked like the ones from BitInstant there would indeed have been prosecutions.

    5. Re:Sorry, not corporate enough. by Anonymous Coward · · Score: 2, Informative

      Citibank is famous for helping the drug cartels launder money :
      http://www.pbs.org/wgbh/pages/...

      And Bank of America, Western Union, and JP Morgan, Goldman-Sacks, etc. are guilty too :
      http://www.huffingtonpost.com/...

      http://www.washingtonsblog.com...
      http://www.npr.org/blogs/paral...
      http://www.infowars.com/big-ba...

    6. Re: Sorry, not corporate enough. by sjames · · Score: 1

      What you're missing is the depth of the investigation. There are plenty of reasons to believe HSBC execs should have known the money was dirty, it sinply wasn't investigated deeply enough.

    7. Re: Sorry, not corporate enough. by Bugamn · · Score: 1

      Why don't you share those details then?

    8. Re: Sorry, not corporate enough. by sjames · · Score: 3, Interesting

      Google around. How about the special cash boxes built specifically to maximize the amount that could be shoved through the cutout in a teller's window. That's a BIG heap of cash being deposited frequently. Exactly the sort of thing that is supposed to trigger suspicion.

    9. Re: Sorry, not corporate enough. by ihtoit · · Score: 1

      HSBC was founded on the back of the opium highway, which is where most of their turnover still originates.

      --
      Political debates have me rolling my eyes so much I think I got optical whiplash. I should sue. - Foamy The Squirrel
    10. Re:Sorry, not corporate enough. by SinisterEVIL · · Score: 1

      Your thinking of Ross Ulbricht, Different person.

  2. Trade $1,000,000 by serviscope_minor · · Score: 4, Insightful

    Help trade $1,000,000 for people to buy drugs for personal use: 2 years in prison.

    Help trade $10,000,000,000 to help drug cartels launder money: er not sure. Remind me what happened to the HSBC execs again...

    --
    SJW n. One who posts facts.
    1. Re:Trade $1,000,000 by Anonymous Coward · · Score: 0

      Help trade $1,000,000 for people to buy drugs for personal use: 2 years in prison.

      Help trade $10,000,000,000 to help drug cartels launder money: er not sure. Remind me what happened to the HSBC execs again...

      We don't talk about that. Finish your supper.

    2. Re:Trade $1,000,000 by Anonymous Coward · · Score: 1

      Too big to fail = too big to jail.

    3. Re:Trade $1,000,000 by Anonymous Coward · · Score: 0

      Yacht cruise with cake and ice cream for everyone and by cake and ice cream I mean strippers and cocaine. Personally I'd go with a weekend of call of duty, 240 tabs, and no wife or kids.

    4. Re:Trade $1,000,000 by Anonymous Coward · · Score: 0

      It's about time we get rid of this "money laundering" crap anyway. Collecting something of value for another and giving them something else of equal value should never be a crime. Money laundering is an invented crime to make prosecutors' jobs easier. Fuck them. Seriously. I know that lets HSBC et. al. off the hook too but so be it.

      Now, the reason any of this is a problem in the first place is largely because of the for-profit War on Drugs (tm), which also needs to go away. The elimination of that would eliminate most of the "money laundering" issues overnight.

    5. Re: Trade $1,000,000 by Anonymous Coward · · Score: 0

      Exactly

    6. Re:Trade $1,000,000 by Anonymous Coward · · Score: 0

      Help trade $10,000,000,000 to help drug cartels launder money: er not sure.

      That did not actually happen.

      Remind me what happened to the HSBC execs again...

      They had to pay lots of money for a "crime" that was never committed and they are not allowed to talk about it.

    7. Re:Trade $1,000,000 by gstoddart · · Score: 1

      Help play a shell game to make $10,000,000,000,000 of crappy American junk debt look like AAA rated debt ... too big to fail or be prosecuted.

      I think we can take it as a given by the time you're heading a bank or a major financial corporation you're a complete crook and a swindler, and are pretty much immune from prosecution ... in no small part because those in power probably profited from your crimes.

      It's the little guys who the justice system is concerned with, the big fish operate with impunity and a wink.

      --
      Lost at C:>. Found at C.
  3. Be strong by Anonymous Coward · · Score: 0

    Sorry to hear about this. Be strong Charlie! Our thoughts are with you.

  4. Re: Just bought boughtcoims by Anonymous Coward · · Score: 3, Funny

    Yes. Sell them and buy rubles.

  5. mis-read by uolamer · · Score: 1

    I thought it said Charlie Sheen

    --
    s/©//g
  6. Bitcoin =! anonymous. by Severus+Snape · · Score: 2

    Slashdot is the last place I would expect to see this myth.

    1. Re:Bitcoin =! anonymous. by Anonymous Coward · · Score: 0

      Slashdot is the last place I would expect to see this myth.

      Bitcoin is as anonymous as you want it to be. By default though it is not, by nature of being a public ledger. =)

    2. Re: Bitcoin =! anonymous. by Anonymous Coward · · Score: 3, Funny

      Slashdot is not the place where I would expect != to be misspelled.

    3. Re: Bitcoin =! anonymous. by Anon-Admin · · Score: 1

      I gave up on spelling corrections some time ago. I was staying at a hotel and went down the hall to get a coke. The machine had a sticker on it that read "This machine does not except cash. Credit cards only!"

      The war on spelling is lost, except it! :P

    4. Re: Bitcoin =! anonymous. by silvermorph · · Score: 1

      Maybe it was an assignment statement. They want us to refer to Bitcoin as !anonymous from now on.

  7. So how does this work? by nitehawk214 · · Score: 1

    Does this mean anyone that deals in bitcoins in any way can now be sent to jail for drug trafficing?

    --
    I'm a good cook. I'm a fantastic eater. - Steven Brust
    1. Re:So how does this work? by Anonymous Coward · · Score: 0, Funny

      I, for one, welcome our police state invoking, aristocratic overlords. Would you like some cake?

    2. Re:So how does this work? by Anonymous Coward · · Score: 1

      Depends on what you're doing with those Bitcoins. In this case the evidence was there to determine that the intention of the trades was to circumvent an auditable money trail in order for illegal transactions to be made.

    3. Re:So how does this work? by Anonymous Coward · · Score: 0

      Yes, if you choose not to kill your enemies and would-be jailers.
      You need to learn how to defend yourselves and murder your enemies.

    4. Re:So how does this work? by PRMan · · Score: 2

      Only if you specifically went around saying, "We're having you deposit money in our bank accounts so we can get around money laundering laws... Freedom to the people and down with the law..."

      That's a paraphrase, but the judge in this case specifically said that he's going to jail because he knew he was getting around the law and that people were buying drugs with the money.

      --
      Peter predicted that you would "deliberately forget" creation 2000 years ago...
    5. Re:So how does this work? by Anonymous Coward · · Score: 0

      Get help, and soon.

    6. Re:So how does this work? by Opportunist · · Score: 1

      Just 'cause your imaginary friend is ok with it doesn't mean that it's sensible.

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    7. Re:So how does this work? by Opportunist · · Score: 1

      I prefer to "neutralize" them. It sounds way more legal.

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    8. Re:So how does this work? by rtb61 · · Score: 1

      So how come the US government has not declared war on every tax haven around the world because those countries know exactly what they are doing. Actively promoting global tax evasion, money laundering, promoting payment systems for major drug trades, government bribes and, arms dealing. Basically acting as the global financial system for organised crime which direct results in death and suffering of citizens from all those economies tax havens derive their parasitical existence.

      --
      Chaos - everything, everywhere, everywhen
    9. Re:So how does this work? by ihtoit · · Score: 1

      is this judge going after the Ford Motor Company as well then? Because they're building cars with the knowledge that they might be used to kill people (and by his logic, 100% of whatever comes off the production line are material evidence in murder investigations).

      --
      Political debates have me rolling my eyes so much I think I got optical whiplash. I should sue. - Foamy The Squirrel
    10. Re:So how does this work? by gstoddart · · Score: 1

      So how come the US government has not declared war on every tax haven around the world because those countries know exactly what they are doing

      Because if the people who collectively make up the US government had it become public just how much money they have hidden in those tax havens it would be awkward.

      See, if you are overtly helping people launder money or get around the law, it looks bad.

      But if you can do it discretely, and in such a way as you may be doing more general banking for rich people ... well, they'll let that slide.

      You think all of those millionaire Senators and Congressmen actually declare and pay taxes on all that money?

      Many of these guys have a direct stake in some companies which have been accused of some pretty shady dealings, and make huge profits from stuff like this.

      Organized crime with a veneer of respectability can be glossed over, and frequently it is. And the system is corrupt, and only really helps out those with money and connections.

      Wall Street and Washington are two of the biggest bunches of crooks you can imagine.

      --
      Lost at C:>. Found at C.
  8. Re:America is a feminist police state by Anonymous Coward · · Score: 0

    Can't marry female children (allowed in the old testament).
    Men are jailed for beating their wives (man is master in old testament).
    Men are divorced by women.
    Men are kicked out of their houses.
    Men are jailed for not paying enough money to woman who divorced him.
    Men own nothing, are nothing, and have no future.

  9. How is this a crime by Anonymous Coward · · Score: 0

    He traded X items for Y amount of money.. How is that any different than, lets say linden dollars in second life? Or a selling your wives crafts? Or 'gold' in WOW?

    Or even your local walmart...

    1. Re:How is this a crime by Anonymous Coward · · Score: 0

      Because he was dealing with illegal goods and he knew it. That is quite different, and illegal.

    2. Re:How is this a crime by mrchaotica · · Score: 1, Insightful

      He was dealing with cash and bitcoin. Nothing else. So which one of those do you claim is illegal?

      The person on the other side of the transaction might have been dealing with illegal goods, but that isn't and shouldn't be any of his business. Otherwise, you could make the exact same argument to persecute anyone who, for example, buys a car from somebody on Craigslist who then uses the cash to buy drugs.

      --

      "[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz

    3. Re:How is this a crime by retchdog · · Score: 2

      And a chop shop is just buying huge amounts of car parts for cash. What's wrong with that? Car parts are legal! Cash is legal! Come on, cut my cousin Vinnie a break, he's just a poor kid who grew up in the South Bronx, your honor!

      --
      "They were pure niggers." – Noam Chomsky
    4. Re:How is this a crime by mrchaotica · · Score: 1

      No, a chop chop receives the stolen cars (acting as an accomplice of the thief), disassembles them, and then sells the parts.

      That part in parentheses is important: if the shop simply bought cars from whoever brought them in and then parted them out, that's a legitimate business.

      Of course, cars are a little bit of a bad example because transferring ownership requires registering the title and whatnot. Let's talk about cellphones instead, since they don't: are those automated kiosks in the mall that let you trade in old cellphones illegal? After all, somebody could steal a cellphone and then turn it in at the kiosk. Does that make the kiosk owner a huge criminal?

      --

      "[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz

    5. Re:How is this a crime by retchdog · · Score: 1

      okay, this seems like it is going to degenerate into a pointless quibble over what an "accomplice" is, since the shit article has no discussion of the evidence or lack thereof. not interested.

      at least you seem to have some idea of a general duty of responsibility. for example, it would be disingenuous for a chop shop to continue to accept, daily, a number of cars exceeding the legitimate resale market and of which a large number are later reported stolen. you probably understand that, so i don't really care about the rest.

      --
      "They were pure niggers." – Noam Chomsky
  10. Bitcoin Exec ?!? by Adeptus_Luminati · · Score: 4, Insightful

    Bitcoin Exec? Really? Is that like the Bitcoin CEO the media was reporting on earlier this year? C'mon slashdot... How about some accuracy in your headlines for a change?

    There is no Bitcoin Exec because bitcoin is not a corporation. There are thousands of bitcoin related companies, but they each have their name. So maybe a title of "Bitinstant Exec..." would have been more accuracy.

    --
    No trees were killed in the making of this post; however, many trillions of electrons were horribly inconvenienced.
    1. Re:Bitcoin Exec ?!? by Anonymous Coward · · Score: 0

      The Bitcoin Emperor approves this message.

  11. Wrong on the guns by stevegee58 · · Score: 4, Interesting

    Get your facts straight people. Silk Road did not sell guns.
    Granted it was allowed at first, but SR distanced themselves from firearms and hadn't allowed their sale for some time at the time of the raid.

    1. Re:Wrong on the guns by IamTheRealMike · · Score: 3, Informative

      Silk Road did a spinoff where guns were being sold as the primary goods (the Armory) and they closed it because it wasn't profitable enough.

    2. Re:Wrong on the guns by shutdown+-p+now · · Score: 1

      They were okay with hitman contracts, but not with guns?

      That's hilarious.

    3. Re:Wrong on the guns by Anonymous Coward · · Score: 0

      They were okay with hitman contracts, but not with guns?

      From where did you pick up this silly idea? Oh, you've been duped by the obvious smear campaign against Ross haven't you.

      That's hilarious.

      Ah, to be stupid. It must be heaven.

  12. Re: America is a feminist police state by Anonymous Coward · · Score: 0

    Solution: Move to Saudi Arabia and marry and beat whoever you like, man.

  13. Re: America is a feminist police state by Anonymous Coward · · Score: 0

    Solution: Move to Saudi Arabia and marry and beat whoever you like, man.

    I agree with you, but geeks tend to disregard that part of Silk Road since they liked other parts of the concept -- they were selling children and women.

  14. Re: America is a feminist police state by Opportunist · · Score: 2

    Now suddenly the free market, with its rule of supply and demand, is bad?

    --
    We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
  15. Huh? We jail CEOs now? by Opportunist · · Score: 1

    When did that happen? Why didn't I get the memo?

    --
    We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
  16. LoL @ Feds by Anonymous Coward · · Score: 0

    I cant wait till Silk Road 3.0 comes out. Gotta keep the spice flowing...

  17. Re: America is a feminist police state by Anonymous Coward · · Score: 0

    "Now suddenly the free market, with its rule of supply and demand, is bad?"

    When it interferes with women's interests, yes!
    (Say the techi faggots).

  18. Re: America is a feminist police state by gstoddart · · Score: 1

    Now suddenly the free market, with its rule of supply and demand, is bad?

    First off, stop worshiping the free market, it's an abstraction, not some holy deity. It's a construct, nothing more.

    Second off, your 'free market' is inherently amoral, and doesn't give a crap about good and bad. If it's profitable to sell women and children, someone will. Because the free market allows you to be a complete and utter douchebag if you can get away with it.

    Which is precisely why the market doesn't achieve optimal outcomes, and only describes the mechanism.

    The free market is a lie. You might as well worship entropy.

    --
    Lost at C:>. Found at C.
  19. Re: America is a feminist police state by Opportunist · · Score: 1

    I admit, sarcasm is hard to identify in written word, but c'mon...

    --
    We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.