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Manhattan U.S. Attorney Announces Charges Against Bitcoin Exchangers, Including Ceo Of Bitcoin Exchange Company, or Scheme !

o Sell And "aunder O#er $% Million In Bitcoins &elated !o Sil' &oad (rug !raffic'ing

Defendants Sold Bitcoins to be Used to Buy and Sell Illegal Drugs Anonymously on the Silk Road Drug Trafficking Website
)reet Bharara, the United States Attorney for the Southern (istrict of *e+ ,or', -ames -. .unt, the Acting Special/Agent/in/Charge of the *e+ ,or' ield (i#ision of the (rug Enforcement Administration 01(EA23, and !oni 4eirauch, the Special Agent/in/Charge of the *e+ ,or' ield Office of the Internal &e#enue Ser#ice, Criminal In#estigation 01I&S/CI23, announced the unsealing of criminal charges in Manhattan federal court against &OBE&! M. AIE""A, a5'5a 1B!C6ing,2 an underground Bitcoin exchanger, and C.A&"IE S.&EM, the Chief Executi#e Officer and Compliance Officer of a Bitcoin exchange company, for engaging in a scheme to sell o#er $% million in Bitcoins to users of 1Sil' &oad,2 the underground +e7site that ena7led its users to 7uy and sell illegal drugs anonymously and 7eyond the reach of la+ enforcement. Each defendant is charged +ith conspiring to commit money laundering, and operating an unlicensed money transmitting 7usiness. S.&EM is also charged +ith +illfully failing to file any suspicious acti#ity report regarding AIE""A8s illegal transactions through the Company, in #iolation of the Ban' Secrecy Act. S.&EM +as arrested yesterday at -ohn . 6ennedy International Airport in *e+ ,or', and is expected to 7e presented in Manhattan federal court later today 7efore U.S. Magistrate -udge .enry )itman. AIE""A +as arrested today at his residence in Cape Coral, lorida, and is expected to 7e presented in federal court in the Middle (istrict of lorida. Manhattan U.S. Attorney )reet Bharara said9 1As alleged, &o7ert aiella and Charlie Shrem schemed to sell o#er $% million in Bitcoins to criminals 7ent on traffic'ing narcotics on the dar' +e7 drug site, Sil' &oad. !ruly inno#ati#e 7usiness models don8t need to resort to old/ fashioned la+/7rea'ing, and +hen Bitcoins, li'e any traditional currency, are laundered and used to fuel criminal acti#ity, la+ enforcement has no choice 7ut to act. 4e +ill aggressi#ely pursue those +ho +ould coopt ne+ forms of currency for illicit purposes.2 (EA Acting Special/Agent/in/Charge -ames -. .unt said9 1!he charges announced today depict la+ enforcement:s commitment to identifying those +ho promote the sale of illegal drugs throughout the +orld. .iding 7ehind their computers, 7oth defendants are charged +ith 'no+ingly contri7uting to and facilitating anonymous drug sales, earning su7stantial profits along the +ay. (rug la+ enforcement8s ;o7 is to in#estigate and identify those +ho a7et the illicit drug trade at all le#els of production and distri7ution including those lining their o+n poc'ets 7y feigning ignorance of any +rong doing and turning a 7lind eye.2 I&S Special/Agent/in/Charge !oni 4eirauch said9 1!he go#ernment has 7een successful in s+iftly identifying those responsi7le for the design and operation of the <Sil' &oad8 +e7site, as +ell as those +ho helped <Sil' &oad8 customers conduct their illegal transactions 7y facilitating the con#ersion of their dollars into Bitcoins. !his is yet another example of the *e+ ,or' Organi=ed Crime (rug Enforcement Stri'e orce8s proficiency in applying financial in#estigati#e resources to the fight against illegal drugs.2 According to the allegations contained in the Criminal Complaint unsealed today in Manhattan federal court9 rom a7out (ecem7er >?%% to Octo7er >?%@, AIE""A ran an underground Bitcoin exchange on the Sil' &oad +e7site, a +e7site that ser#ed as a spra+ling and anonymous 7lac' mar'et 7a=aar +here illegal drugs of #irtually e#ery #ariety +ere 7ought and sold regularly 7y the site8s users. Operating under the username 1B!C6ing,2 AIE""A sold Bitcoins A the only form of payment accepted on Sil' &oad A to users see'ing to 7uy illegal drugs on the site. Upon

recei#ing orders for Bitcoins from Sil' &oad users, he filled the orders through a company 7ased in *e+ ,or', *e+ ,or' 0the 1Company23. !he Company +as designed to ena7le customers to exchange cash for Bitcoins anonymously, that is, +ithout pro#iding any personal identifying information, and it charged a fee for its ser#ice. AIE""A o7tained Bitcoins +ith the Company8s assistance, and then sold the Bitcoins to Sil' &oad users at a mar'up. S.&EM is the Chief Executi#e Officer of the Company, and from a7out August >?%% until a7out -uly >?%@, +hen the Company ceased operating, he +as also its Compliance Officer, in charge of ensuring the Company8s compliance +ith federal and other anti/money laundering 01AM"23 la+s. S.&EM is also the Bice Chairman of a foundation dedicated to promoting the Bitcoin #irtual currency system. S.&EM, +ho personally 7ought drugs on Sil' &oad, +as fully a+are that Sil' &oad +as a drug/ traffic'ing +e7site, and through his communications +ith AIE""A, S.&EM also 'ne+ that AIE""A +as operating a Bitcoin exchange ser#ice for Sil' &oad users. *e#ertheless, S.&EM 'no+ingly facilitated AIE""A8s 7usiness +ith the Company in order to maintain AIE""A8s 7usiness as a lucrati#e source of Company re#enue. S.&EM 'no+ingly allo+ed AIE""A to use the Company8s ser#ices to 7uy Bitcoins for his Sil' &oad customersC personally processed AIE""A8s ordersC ga#e AIE""A discounts on his high/#olume transactionsC failed to file a single suspicious acti#ity report +ith the United States !reasury (epartment a7out AIE""A8s illicit acti#ity, as he +as other+ise reDuired to do in his role as the Company8s Compliance OfficerC and deli7erately helped AIE""A circum#ent the Company8s AM" restrictions, e#en though it +as S.&EM8s ;o7 to enforce them and e#en though the Company had registered +ith the !reasury (epartment as a money ser#ices 7usiness. 4or'ing together, S.&EM and AIE""A exchanged o#er $% million in cash for Bitcoins for the 7enefit of Sil' &oad users, so that the users could, in turn, ma'e illegal purchases on Sil' &oad. In late >?%>, +hen the Company stopped accepting cash payments, AIE""A ceased doing 7usiness +ith the Company and temporarily shut do+n his illegal Bitcoin exchange ser#ice on Sil' &oad. AIE""A resumed operating on Sil' &oad in April >?%@ +ithout the Company8s assistance, and continued to exchange tens of thousands of dollars a +ee' in Bitcoins until the Sil' &oad +e7site +as shut do+n 7y la+ enforcement in Octo7er >?%@. EEE AIE""A, F>, of Cape Coral, lorida, and S.&EM, >G, of *e+ ,or', *e+ ,or', are each charged +ith one count of conspiracy to commit money laundering, +hich carries a maximum sentence of >? years in prison, and one count of operating an unlicensed money transmitting 7usiness, +hich carries a maximum sentence of fi#e years in prison. S.&EM is also charged +ith one count of +illful failure to file a suspicious acti#ity report, +hich carries a maximum sentence of fi#e years in prison. Mr. Bharara praised the outstanding in#estigati#e +or' of the (EA8s *e+ ,or' Organi=ed Crime (rug Enforcement Stri'e orce, +hich is comprised of agents and officers of the U. S. (rug Enforcement Administration, the *e+ ,or' City )olice (epartment, Immigration and Customs Enforcement / .omeland Security In#estigations, the *e+ ,or' State )olice, the U. S. Internal &e#enue Ser#ice Criminal In#estigation (i#ision, the ederal Bureau of In#estigation, the Bureau of Alcohol, !o7acco, irearms and Explosi#es, U.S. Secret Ser#ice, the U.S. Marshal Ser#ice, *e+ ,or' *ational Huard, Office of oreign Assets Control and the *e+ ,or' (epartment of !axation and inance. Mr. Bharara also than'ed the BI8s *e+ ,or' ield Office. Mr. Bharara also noted that the in#estigation remains ongoing. !he prosecution of this case is 7eing handled 7y the Office8s Complex rauds Unit. Assistant

United States Attorney Serrin !urner is in charge of the prosecution, and Assistant United States Attorney Andre+ Adams of the Asset orfeiture Unit is in charge of the forfeiture aspects of the case. !he charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until pro#en guilty.