<div dir="ltr"><a href="http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR.php">http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR.php</a><br><div align="center"><div style="text-align:left">
<br>I'm considering starting a slightly-higher-than-market rate cloud mining operation to allow people to avoid the exchanges and mine their own coins to avoid situations like this..<br><br></div><div style="text-align:left">
R<br></div><h1 style="text-align:left"><font size="4">
</font></h1><h1 style="text-align:left"><font size="4">Manhattan U.S. Attorney Announces Charges Against Bitcoin Exchangers, Including Ceo Of Bitcoin Exchange Company, For Scheme To Sell And Launder Over $1 Million In Bitcoins Related To Silk Road Drug Trafficking</font></h1>
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<div class=""><b>FOR IMMEDIATE RELEASE</b></div>
<div class="">
Monday, January 27, 2014
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<h3 style="text-align:left"><i>Defendants Sold Bitcoins to be Used to Buy and Sell Illegal Drugs Anonymously on the Silk Road Drug Trafficking Website</i></h3>
<p>Preet Bharara, the United States Attorney for the Southern District
of New York, James J. Hunt, the Acting Special-Agent-in-Charge of the
New York Field Division of the Drug Enforcement Administration (“DEA”),
and Toni Weirauch, the Special Agent-in-Charge of the New York Field
Office of the Internal Revenue Service, Criminal Investigation
(“IRS-CI”), announced the unsealing of criminal charges in Manhattan
federal court against ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground
Bitcoin exchanger, and CHARLIE SHREM, the Chief Executive Officer and
Compliance Officer of a Bitcoin exchange company, for engaging in a
scheme to sell over $1 million in Bitcoins to users of “Silk Road,” the
underground website that enabled its users to buy and sell illegal drugs
anonymously and beyond the reach of law enforcement. Each defendant is
charged with conspiring to commit money laundering, and operating an
unlicensed money transmitting business. SHREM is also charged with
willfully failing to file any suspicious activity report regarding
FAIELLA’s illegal transactions through the Company, in violation of the
Bank Secrecy Act. SCHREM was arrested yesterday at John F. Kennedy
International Airport in New York, and is expected to be presented in
Manhattan federal court later today before U.S. Magistrate Judge Henry
Pitman. FAIELLA was arrested today at his residence in Cape Coral,
Florida, and is expected to be presented in federal court in the Middle
District of Florida.</p>
<p>Manhattan U.S. Attorney Preet Bharara said: “As alleged, Robert
Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to
criminals bent on trafficking narcotics on the dark web drug site, Silk
Road. Truly innovative business models don’t need to resort to
old-fashioned law-breaking, and when Bitcoins, like any traditional
currency, are laundered and used to fuel criminal activity, law
enforcement has no choice but to act. We will aggressively pursue those
who would coopt new forms of currency for illicit purposes.”</p>
<p>DEA Acting Special-Agent-in-Charge James J. Hunt said: “The charges
announced today depict law enforcement's commitment to identifying those
who promote the sale of illegal drugs throughout the world. Hiding
behind their computers, both defendants are charged with knowingly
contributing to and facilitating anonymous drug sales, earning
substantial profits along the way. Drug law enforcement's job is to
investigate and identify those who abet the illicit drug trade at all
levels of production and distribution including those lining their own
pockets by feigning ignorance of any wrong doing and turning a blind
eye.”</p>
<p>IRS Special-Agent-in-Charge Toni Weirauch said: “The government has
been successful in swiftly identifying those responsible for the design
and operation of the ‘Silk Road’ website, as well as those who helped
‘Silk Road’ customers conduct their illegal transactions by facilitating
the conversion of their dollars into Bitcoins. This is yet another
example of the New York Organized Crime Drug Enforcement Strike Force’s
proficiency in applying financial investigative resources to the fight
against illegal drugs.”</p>
<p>According to the allegations contained in the Criminal Complaint unsealed today in Manhattan federal court:</p>
<p>From about December 2011 to October 2013, FAIELLA ran an underground
Bitcoin exchange on the Silk Road website, a website that served as a
sprawling and anonymous black market bazaar where illegal drugs of
virtually every variety were bought and sold regularly by the site’s
users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins –
the only form of payment accepted on Silk Road – to users seeking to buy
illegal drugs on the site. Upon receiving orders for Bitcoins from
Silk Road users, he filled the orders through a company based in New
York, New York (the “Company”). The Company was designed to enable
customers to exchange cash for Bitcoins anonymously, that is, without
providing any personal identifying information, and it charged a fee for
its service. FAIELLA obtained Bitcoins with the Company’s assistance,
and then sold the Bitcoins to Silk Road users at a markup.</p>
<p>SHREM is the Chief Executive Officer of the Company, and from about
August 2011 until about July 2013, when the Company ceased operating, he
was also its Compliance Officer, in charge of ensuring the Company’s
compliance with federal and other anti-money laundering (“AML”) laws.
SHREM is also the Vice Chairman of a foundation dedicated to promoting
the Bitcoin virtual currency system.</p>
<p>SHREM, who personally bought drugs on Silk Road, was fully aware that
Silk Road was a drug-trafficking website, and through his
communications with FAIELLA, SHREM also knew that FAIELLA was operating a
Bitcoin exchange service for Silk Road users. Nevertheless, SHREM
knowingly facilitated FAIELLA’s business with the Company in order to
maintain FAIELLA’s business as a lucrative source of Company revenue.
SHREM knowingly allowed FAIELLA to use the Company’s services to buy
Bitcoins for his Silk Road customers; personally processed FAIELLA’s
orders; gave FAIELLA discounts on his high-volume transactions; failed
to file a single suspicious activity report with the United States
Treasury Department about FAIELLA’s illicit activity, as he was
otherwise required to do in his role as the Company’s Compliance
Officer; and deliberately helped FAIELLA circumvent the Company’s AML
restrictions, even though it was SHREM’s job to enforce them and even
though the Company had registered with the Treasury Department as a
money services business.</p>
<p>Working together, SHREM and FAIELLA exchanged over $1 million in cash
for Bitcoins for the benefit of Silk Road users, so that the users
could, in turn, make illegal purchases on Silk Road.</p>
<p>In late 2012, when the Company stopped accepting cash payments,
FAIELLA ceased doing business with the Company and temporarily shut down
his illegal Bitcoin exchange service on Silk Road. FAIELLA resumed
operating on Silk Road in April 2013 without the Company’s assistance,
and continued to exchange tens of thousands of dollars a week in
Bitcoins until the Silk Road website was shut down by law enforcement in
October 2013.</p>
<p align="center">* * *</p>
<p>FAIELLA, 52, of Cape Coral, Florida, and SHREM, 24, of New York, New
York, are each charged with one count of conspiracy to commit money
laundering, which carries a maximum sentence of 20 years in prison, and
one count of operating an unlicensed money transmitting business, which
carries a maximum sentence of five years in prison. SHREM is also
charged with one count of willful failure to file a suspicious activity
report, which carries a maximum sentence of five years in prison.</p>
<p>Mr. Bharara praised the outstanding investigative work of the DEA’s
New York Organized Crime Drug Enforcement Strike Force, which is
comprised of agents and officers of the U. S. Drug Enforcement
Administration, the New York City Police Department, Immigration and
Customs Enforcement - Homeland Security Investigations, the New York
State Police, the U. S. Internal Revenue Service Criminal Investigation
Division, the Federal Bureau of Investigation, the Bureau of Alcohol,
Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal
Service, New York National Guard, Office of Foreign Assets Control and
the New York Department of Taxation and Finance. Mr. Bharara also
thanked the FBI’s New York Field Office.</p>
<p>Mr. Bharara also noted that the investigation remains ongoing.</p>
<p>The prosecution of this case is being handled by the Office’s Complex
Frauds Unit. Assistant United States Attorney Serrin Turner is in
charge of the prosecution, and Assistant United States Attorney Andrew
Adams of the Asset Forfeiture Unit is in charge of the forfeiture
aspects of the case.</p>
<p>The charges contained in the Complaint are merely accusations, and
the defendants are presumed innocent unless and until proven guilty.</p>
<p>14-024</p></div>