Former Bitcoin Foundation board member and CEO of the now out of business BitInstant Charlie Shrem has officially been sentenced to two years in prison in connection to activities aimed at helping Silk Road users swap their digital currency for cash.
Silk Road was an online black market busted by the FBI in 2013. Though there was a sequel site, it met the same fate as its predecessor in Nvoember 2014.
Evidence presented against Shrem indicated that he agreed to partner with Robert M. Faiella to trade over one million dollars in cash from buyers. Faiella used the name BTC king to promote his bitcoins to dollars marketplace.
The scheme worked by allowing customers to deposit cash into a bank account. Shrem would then use Bitinstant to tranffer the corresponding amount back to Faiella which he'd pass on to buyers' Bitcoin wallets.
One undercover agent deposited $500.11 to a bank account and got $444 worth of BTC later that same day.
Shrem’s council placed the blame on Shrem’s youth at the time of the crime (he was 22), but ultimately he pled guilty. He did try to persuade US District Judge Jed Rakoff not to lock him up, saying "I screwed up. The Bitcoin community, they're scared and there is no money laundering going on any more. They're terrified. Bitcoin is my baby, it's my whole world and my whole life, it's what I was put on this earth to do. I need to be out there. If your honor grants me that, I can be out there in the world, making sure that people don't do the same stupid things that I did.”
Judge Rakoff was less than persuaded and noted "substantial prison sentence" was needed to serve as a warning to other unlicensed money transmitting businesses.
Shrem will spend two years in prison and forfeit $950,000. This is less than the six years prosecutors asked for.