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Finance

Bitcoin promoter Shrem pleads guilty to unlicensed currency use

The man who was at the forefront of promoting the Bitcoin online payment system has pleaded guilty to operating an unlicensed money transmitting business. He and a co-accused could face a substantial prison sentence.

Bitcoin entrepreneur Charlie Shrem on Thursday pleaded guilty to the unlicensed transmitting of money, settling US charges that he engaged in a scheme to sell currency to users of an illicit online narcotics marketplace.

The 24-year-old had faced the additional charges of conspiring to launder money and failing to file suspicious activity reports with government banking authorities.

The former vice chairman of the Bitcoin Foundation, Shrem was accused of conspiring to sell more than $1 million in Bitcoins that would be used for drugs transactions on the site, Silk Road, between December 2011 and last October. Prosecutors claim Silk Road users were able to buy and sell drugs, as well as other illicit goods and services, using the online currency.

Shrem's co-accused Robert Faiella was accused of being part of the conspiracy. The pair pleaded guilty at a New York federal court as part of a deal with prosecutors in Manhattan.

Market knowledge

Both men face up to five years in prison when they appear again in court, with sentencing set for January 20.

"I knew that much of the business on Silk Road involved the buying and selling of narcotics," Shrem admitted in court. "I knew that what I was doing was wrong."

Shrem was arrested in January, stepping down from his post as Bitcoin vice president as a result.

Prosecutors are pursuing a separate case against Ross William Ulbricht, who is accused of creating and operating Silk Road using the name "Dread Pirate Roberts." Ulbricht is set to face trial on November 3.

In July, New York regulators proposed a framework for virtual commerce, involving the establishment of "BitLicenses" for those who buy and sell virtual currency as a business.

rc/lw (AP, Reuters)