Charlie Shrem, the chief executive officer of bitcoin exchange BitInstant, has been arrested and charged with money laundering who also purchased drugs from Silk Road according to a press release 

Shrem was arrested at JFK airport on 26 January and was also charged, along with alleged co-conspiratior Robert Faiella, of selling more than $1 million (£600,000) worth of bitcoins to users of Silk Road, the website formerly operating as an anonymous drugs and ammunitions marketplace, and where bitcoin was the only accepted currency.

BitInstant is currently offline and was recently subjected to a class-action lawsuit, alleging the site of misrepresenting the speed of its services.

Shrem, 24, is also listed as a founding member and vice chairman of the Bitcoin Foundation, where he is praised with “paving the way for the bitcoin economy to emerge in early 2011.”

In a shot across the bow to Silk Road users

The charges announced today depict law enforcement’s commitment to identifying those who promote the sale of illegal drugs throughout the world. Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way. Drug law enforcement’s job is to investigate and identify those who abet the illicit drug trade at all levels of production and distribution including those lining their own pockets by feigning ignorance of any wrong doing and turning a blind eye.”

IRS Special-Agent-in-Charge Toni Weirauch said: “The government has been successful in swiftly identifying those responsible for the design and operation of the ‘Silk Road’ website, as well as those who helped ‘Silk Road’ customers conduct their illegal transactions by facilitating the conversion of their dollars into Bitcoins. This is yet another example of the New York Organized Crime Drug Enforcement Strike Force’s proficiency in applying financial investigative resources to the fight against illegal drugs.”