Charlie Shrem, CEO of Bitcoin exchange BitInstant, has been arrested in connection with money laundering.
Shrem, also vice-president of the Bitcoin Foundation, was arrested on suspicion of selling over $1 million in bitcoins to Silk Road website users.
Shrem and a co-accused Robert Faiella, an underground Bitcoin exchanger, are expected to be charged with conspiring to commit money laundering and operating an unlicensed money transmitting business when they appear in court later today.
Faiella allegedly obtained bitcoins with the company’s assistance, and then sold them to Silk Road users at a mark-up.
Manhattan Attorney Preet Bharara said: "Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act."
"Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way," said James Hunt, of the drug enforcement agency in a release.
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