Winklevoss-Backed Founder Of BitInstant Arrested For $1 Million Money Laundering Scheme


Charlie Schrem (pictured above, left), 24-year-old CEO of BitInstant, was arrested Monday morning in NYC’s John F. Kennedy Airport, accused of orchestrating a money-laundering scheme via the Silk Road online marketplace, according to Time.

As we reported in May, Tyler and Cameron Winklevoss led a $1.5 million investment round in the company, which was a cornerstone of their bullish views on Bitcoin. BitInstant, a platform for buying and selling the crypto-currency, was New York City’s largest Bitcoin business, according to a New York Observer profile last year. However, the site has been offline since at least October, and is currently in the midst of a class-action lawsuit which accuses the site of misrepresenting its service speed.

Manhattan U.S. Attorney Preet Bharara says, “Robert Faiella and Charlie Schrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site, Silk Road … Schrem, who personally bought drugs on Silk Road, was fully aware that Silk Road was a drug-trafficking website.”

Last year, Schrem told The New York Observer that, “I won’t hire you unless I’ve either had a drink with you or smoked weed with you.”

The Observer also reported that Schrem was a part-owner of New York City bar EVR, which remains one of the few physical establishments to accept Bitcoins.

Winklevoss Capital — which has been reported to own at least 1% of all Bitcoins –has released a statement: “Although BitInstant is not named in today’s indictment of Charlie Shrem, we are obviously deeply concerned about his arrest.  We were passive investors in BitInstant and will do everything we can to help law enforcement officials.”

Considering Silk Road was officially taken off-line in October, it is likely that Schrem’s arrest was months in the making.