Owners and operators of two Bitcoin exchanges have been arrested in the US, with the Department of Justice stating that both Robert Faiella and Charlie Shrem have been charged with money laundering. The DoJ believes that the pair were involved in a scheme using Silk Road that involved selling $1 million worth of Bitcoins and that Mr Shrem allowed Mr Faiella to use the BitInstant Exchange for users to purchase Bitcoins before using them on Silk Road to purchase drugs. Prosecutors believe that Mr Shrem was aware that such purchases were being made and is therefore in violation of the Bank Secrecy Act which means that financial institutions must alert relevant authorities should they spot any suspicious activity. With Mr Shrem not doing so, he is therefore being charged.
Arrests were sure to follow after the closure of Silk Road and James Hunt from the US DEA stated that, "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." Mr Shrem is a prominent proponent of Bitcoin and was a founder member of the Bitcoin Foundation and this news comes as a shock to other members of the group that wish to promote Bitcoin as an alternative currency with a spokesperson saying that, "As a foundation, we take these allegations seriously and do not condone illegal activity." The case continues however it’s yet another pointer as to why serious investment and usage of Bitcoin is slow on the uptake.