Major Bitcoin Figure To Plead Guilty To Currency Manipulation

Bitcoin figure Charlie Shrem, accused of a plot to sell more than $1 million in Bitcoins improperly, will plead guilty on Thursday (Sept. 4) in New York federal court to “unlicensed money transmission, his lawyer is quoted saying in a Reuters report.

“Soon after his arrest in January, Shrem stepped down from his role (as vice chairman) at the Bitcoin Foundation, a well-known trade group. He was previously CEO of BitInstant, a bitcoin exchange company,” Reuters said.

The scheme involved an attempt to sell the digital currency on online marketplace Silk Road, the story said. “Prosecutors had previously charged Shrem with operating an unlicensed money transmitting business, money laundering conspiracy and failing to file suspicious activity reports with government banking authorities,” Reuters reported. “Federal authorities shut down Silk Road last year, though a new Internet marketplace under the same name was launched in November. Prosecutors contend Silk Road enabled users to buy and sell illegal drugs and other illicit goods and services.”

These are bad days for Bitcoin senior officials and the law. Beyond being a vice chairman of the Bitcoin Foundation, he was also one of its founders, along with Mark Karpeles. Seems that Karpeles has his own legal troubles back in his home country of France.

“While Mt. Gox owner Mark Karpeles was growing what would become the world’s largest Bitcoin exchange, he should have been serving time in his home country of France,” reported ARS Technica. “He was sentenced to a year in custody in 2010 on fraud accusations. A newly obtained French court document shows that Karpeles has a civil and non-civil judgment pending where, in addition to custody, he also owes €45,000 ($60,000).  The case was brought by a former employer who accused Karpeles of stealing customer user names, customer passwords, and a domain name, among other grievances.

The case is unusual in that the court decision had been made without Karpeles’ active involvement because he was living in Japan at the time. “To be honest, I was not even aware of this,” ARS Technica quotes him as saying.

He had convicted of  “fraudulent access to an automated data processing system” and “fraudulent changes to data contained in an automated data processing system,” the story said. The story references other legal difficulties for Karpeles in Japan (involving $20,000 paid to create a Web site that was allegedly never created. The court ordered Karpeles to return the money) and in France, where the accusation involves stealing an employer’s data.