Charlie ShremIs Jailed

Charlie Shrem Money Laundering

“Charlie Shrem knowingly facilitated the purchase and use of Bitcoins by others to buy illegal drugs on the Silk Road site. He willfully abdicated his duties as compliance officer of BitInstant, putting illegal profit ahead of legal and ethical responsibility. Now Shrem has been made to answer for his crimes.” – Manhattan U.S. Attorney Preet Bharar

Charlie Shrem, former BitInstant CEO and founding member of the Bitcoin Foundation, was sentenced to two years in jail and three years of probation in a New York City courthouse yesterday. His sentence is three years shorter than a jail sentence in a plea deal he struck in September. He admitted he was guilty of aiding and abetting the operation of an unlicensed money transmitting business, and voluntarily forfeited $950,000 as part of the deal.

Marc Agnifilo, Shrem’s defense counsel, asked the judge to consider Shrem’s age, experience, and behavior since the incident when deciding the sentencing. Agnifilo noted, in the two years since his client stopped selling bitcoins to the dark web dealer, Shrem has lawfully participated the over-the-counter trade and Bitcoin businesses since his arrest. He also mentioned how his client has used his stance as a public figure to spread awareness of the need for Bitcoin companies to comply with existing laws.

Shrem also made a plea himself, reportedly saying, “I need to be out there … helping the world to make sure they don’t do a stupid thing like I did.”

Co-founder of Coinapult and fromer BitInstant Business Developer, Erik Voorhees, made a Reddit post about his friend and former co-worker’s sentencing. “Words cannot express the sadness and outrage I’m feeling right now. Banks such as HSBC are found guilty of laundering billions of dollars not just for drug users but for violent crime cartels. Billions. Violent crime. And yet not a single exec faces a day of jail time. Charlie Shrem, who sold Bitcoins to someone who helped people buy drugs on Silk Road, has now been sentenced to two years in jail.”

The post is on the front page of the Bitcoin subreddit with almost 2,000 upvotes.

HSBC, a large US bank, agreed to pay the fine of $32,000 fine this Tuesday after admitting to facilitating the transfer of funds from financiers to the militant terrorist group, Hezbollah, through their bank. The US Treasury Department concluded the money laundering was not “the result of willful or reckless conduct.” This is despite Everett Stern, a former HSBC compliance officer, telling the Huffington Post he reported the transaction as suspicious and likely linked to Hezbollah previously.

“They admit to financing terrorism and they get fined $32,000. Where if I were to do that, I would go to jail for life.” – Stern

This is the third time the bank was fined for funding terrorist groups this decade. In 2010 and April 2011 the bank moved money for a development company that acted as a front for wealthy Africans who were funding Hezbollah and was fined $40k. In 2012, in the  2012 Senate report the bank was found to have helped drug cartels and a Saudi Arabian bank linked to al Qaeda by the CIA, transfer funds and was fined $1.9b.

“The source of my anger is the extent of the punishment relative to the ‘crime’ he committed, and this in the context of bank execs who get caught laundering BILLIONS of dollars not just for recreational drug use but in fact for terrorist groups, and yet not a single charge is brought against them.”– Voorhees

Bitcoinist Charlie Shrem Sentenced to Two Years
Many community members were angry at the uncertainty concerning what is legal and illegal for bitcoin as well. When one redditor asked why was this considered money laundering another mockingly replied, “Because if you sell a Bitcoin to someone, you have to get his fingerprint and his home address and a copy of his utility bills and his social security number and file a report with the government, otherwise you are an evil criminal who should do 30 years in prison.”

Shrem and his associate are not the only people arrested for running an unlicensed money transfer connected to Bitcoin. A month after Shrem’s arrest, two men in Florida were arrested on charges of money laundering and running an unlicensed money transmitting business because of large sales of bitcoin. Pascal Reid and Michel Abner Espinoza sold large amounts of bitcoin through the peer to peer bitcoin trading site, LocalBitcoins, to undercover officers posing as costumers who planned to use them for illegal purposes.

Reid and Espinoza individually sold over $25,000 of bitcoin to undercover officers. The two decided to go through with the sale, even though the undercover officers said they were going to use the bitcoins to buy stolen credit cards. Their cases are still ongoing.
Being arrested does not seem to hurt Shrem’s standing in the community. Many have said they will welcome him back into the community when he is released from prison and have considered his former business as an important part of bitcoin history. One redditor commented, “What Charlie did was help build bitinstant, which will always be remembered as one of the first easy ways to acquire a stake in this new, free economy based on cryptocurrency.”

Photo source: cryptograffiti

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