Former Bitcoin Executive Sentenced To Two Years In Jail

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Charlie Schrem

Charlie Schrem, the former CEO of bitcoin exchange Bit Instant, a former Bitcoin Foundation vice chairman, and one of the biggest bitcoin advocates, received a two year federal prison sentence on Friday, December 19, for his role in helping to facilitate the conversion of over $1 million, into bitcoins, which were used to trade on the Silk Road, an online drug black market.


Schrem was charged with helping to send money on behalf of an illegal bitcoin trader in January, after the FBI shut down the first Silk Road, an online bazaar, where people could buy drugs, as well as goods and services anonymously. The investigation revealed that Schrem had helped Robert Faiella, also known as BTCKing, who was an illegal bitcoin trader out of Florida, trade over $1 million for bitcoins, which were eventually used to trade on the Silk Road.

BitcoinsIn addition to the two year sentence, presiding judge Jed Rakoff, ordered Schrem to pay a fine of $950,000, after he pleaded guilty to helping Faiella convert cash into bitcoins illegally, in September. Prior to the sentencing, Schrem was facing a maximum five year sentence, with the probation office recommending that he serves a 57 month term. His lawyers tried to argue that Schrem’s actions were that of a young man who didn’t know any better, while the prosecutors argued that Schrem was aware that his actions promoted drug trafficking, but didn’t care.

Schrem also tried to convince the judge not to sentence him to prison, by admitting that he screwed up, and that his arrest has scared a lot of people in the bitcoin trading community straight, and that there is no more illegal activity or money laundering going on. He also told the judge that he would be better off staying out of prison, so he can be out there to make sure that others don’t make the same mistakes that he did. Judge Rakoff didn’t buy the defense’s excuse that Schrem was a young man that didn’t know any better, saying that Schrem excitedly participated in a crime that involved serious violations of the law.

After sentencing on Friday, Schrem was given 90 days to turn himself in, for his prison term, which will begin in March.