The CEO of Bitcoin New York-based exchange BitInstant, Charlie Shrem, was arrested and charged with money laundering.

In the federal criminal complaint, the Southern District of New York charges that Shrem knowingly helped underground Bitcoin exchanger Robert M. Faiella, known as “BTCKing,” purchase bitcoins for his customers to use to make illicit purchases on the notorious drug trafficking Silk Road website. Both men face charges of operating an unlicensed money transmitting business and money laundering conspiracy. Shrem faces an additional count of willful failure to file suspicious activity, according to the complaint.

According to Manhattan U.S. Attorney Preet Bharara: “As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site, Silk Road. Truly innovative business models don’t need to resort to old-fashioned law-breaking, and when Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would coopt new forms of currency for illicit purposes.”

The 24-year-old Shrem was arrested at New York’s John F. Kennedy International Airport on Sunday and Faiella was arrested at his Cap Coral, Florida home on Monday. Shrem is vice chairman of the Bitcoin Foundation, one of the currency’s biggest advocates

BitInstant is backed by well-known investors including Cameron and Tyler Winklevoss, co-founders of Winklevoss Capital and the Harvard twins who settled with Mark Zuckerberg over the founding of Facebook.

Tyler and Cameron Winklevoss told Time in response to the arrest:

“When we invested in BitInstant in the fall of 2012, its management made a commitment to us that they would abide by all applicable laws – including money laundering laws – and we expected nothing less.  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. We fully support any and all governmental efforts to ensure that money laundering requirements are enforced, and look forward to clearer regulation being implemented on the purchase and sale of bitcoins.”

A class action suit was filed against BitInstant in August alleging misrepresentation of the speed of its services. The exchange has been offline for several months.

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