The office of the U.S. Attorney for the Southern District of New York has announced that Robert Faiella, also known by the username BTCKing, and a bitcoin exchange co-founder and former CEO, Charlie Shrem, pleaded guilty on charges in connection with knowingly selling bitcoins to aid in criminal activity. The agency said in a press release that the two transmitted money for the purpose of drug trafficking through the black market website Silk Road.
Faiella charged with selling $1 million in bitcoins
U.S. Attorney Preet Bharara charged the two men. Officials say Faiella sold about $1 million in bitcoins to drug traffickers selling narcotics on the Silk Road website. They unsealed the information related to the indictment and charges on Thursday.
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According to the complaint, Failla operated an underground bitcoin exchange on Silk Road between December 2011 and October 2013. Officials said he received orders for bitcoins from users of Silk Road and filled them through a New York-based company.
Users reportedly exchanged cash for the digital currency anonymously, and the company charged a fee for the service. They said Failla operated under the user name BTCKing and never registered his business as a money transmitting business with the U.S. Treasury Dept.
Shrem charged with facilitating Faiella’s business
Officials said Shrem was CEO and compliance officer for a bitcoin exchange. They added that he knew Silk Road was a drug trafficking website and that Faiella was running a bitcoin exchange for the website’s users.
However, they say he knowingly helped Faiella’s business to keep it as a “lucrative source of revenue.” They also said he allowed Faiella to use the company to buy bitcoins for Silk Road users and personally processed his orders In addition, they said he gave Faiella a discount on his high volume transactions. They added that Shrem did not file any suspicious activity reports with the U.S. Treasury Dept. regarding Faiella’s activity, which he was required to do in his role as compliance officer.
Faiella pleaded guilty to “one count of operating an unlicensed money transmitting business through which he knowingly transmitted funds intended to be used to promote or support unlawful activity.” The maximum sentence for that charge is five years in prison. Shrem pleaded guilty to aiding and abetting him. The maximum sentence for that charge is also five years in prison.
Both men will be sentenced on Jan. 20.