Bitcoin Exchanger Facing Charges For Money Laundering

Manhattan US Attorney alleges BitInstant engaged in a scheme to launder drug money using Bitcoin exchanges.
Bitcoin Exchanger Facing Charges For Money Laundering

This case highlights why I've been so adamant in my opposition to the use of Bitcoin for political contributions and expenditures.

Time.com:

In the federal criminal complaint, the Southern District of New York charges Shrem, the 24-year-old CEO of BitInstant, with three counts, including one count operating an unlicensed money transmitting business, one count of money laundering conspiracy and one count willful failure to file suspicious activity report. Robert Faiella, a Silk Road user who operated under the name “BTCKing,” was charged with one count of operating an unlicensed money transmitting business and one count money laundering conspiracy.

The complaint alleges that Faiella took orders from Silk Road users hoping to purchase Bitcoin, the anonymous peer-to-peer crypto-currency. Shrem then filled the orders by transferring funds into an account controlled by Faiella and hosted on a third-party Japan-based Bitcoin exchange. Together the two allegedly sold over $1 million in Bitcoin to Silk Road users, who then used those Bitcoins to attempt to purchase anonymously drugs and other illegal goods from the deep web black market.

This is really the point of Bitcoin and has been for some time. Most Bitcoin supporters will argue forcefully that there's a need for a form of currency that allows the user to remain in the shadows and the use to go undisclosed. My problem with that? I have trouble imagining that need outside of the context of criminal activity.

In an op-ed last month, BusinessInsider predicted that Bitcoin would become the currency of choice for money launderers.

The evidence is clear: the ability to conceal movements of money is not a tool of the little guy. Those nameless oppressive governments, that bitcoin proponents oppose, are filled with corrupt officials that absolutely adore financial opacity.

Read more: http://www.businessinsider.com/why-bitcoin-and-other-cryptocurrencies-wi...

Money laundering is a huge boon to billionaires, and virtual currencies like Bitcoin are new enough to offer prime opportunities for profit in an unregulated new technology. From the FEC to the IRS, there are debates about how to treat virtual currencies for reporting, disclosure, and taxation purposes. Which is, of course, the point.


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Update: This is very, very bad news for the Bitcoin Foundation, financed by Marc Andreessen's group. According to The Guardian, Charlie Shrem is vice-chair of the Bitcoin Foundation.

Read the full complaint:

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