4 Years in Prison for BitInstant Exchanger Who Helped Silk Road
January 21, 2015
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4 Years in Prison for BitInstant Exchanger Who Helped Silk Road

A Florida bitcoin exchanger who admitted he enabled the digital currency to be funneled to the black market website Silk Road for drug sales was sentenced on Tuesday to four years in prison.

Robert Faiella, 55, was sentenced by U.S. District Judge Jed Rakoff in Manhattan after pleading guilty to operating an unlicensed money transmitting business.

U.S. District Judge Jed Rakoff noted that Robert Faiella had been convicted in a tax case previously and his sentence needed to be long enough to deter him from committing other crimes.

In his case, clearly he didn’t learn the lesson” said the judge, who also ordered Faiella to forfeit $950,000.

His sentencing came as trial continued for Ross Ulbricht, the alleged operator of Silk Road, a website where drugs and other illicit goods could be bought secretly with bitcoin.

Faiella, 55, pleaded guilty in September to operating an unlicensed money transfer business. The Fort Myers Beach, Florida, resident admitted earning about $30,000 in commissions by enabling drug transactions from December 2011 through October 2013.

Rakoff in December sentenced Shrem, the former vice chairman at the trade group Bitcoin Foundation, to two years in prison for aiding and abetting an unlicensed money transmitting business.

Faiella and Shrem were accused of letting more than $1 million in bitcoins reach the Silk Road website. Authorities have said Silk Road’s San Francisco operator generated more than $1 billion in illicit business from 2011 until the website was shut down in 2013.

Prosecutors said Shrem, who was vice chairman of a foundation dedicated to promoting the bitcoin currency, failed to file even one suspicious-activity report with the U.S. Department of the Treasury regarding Faiella.

Before the announcement of the sentence, Faiella told the judge: “I broke the law, and I’m here to face the consequences of that.”

Operating under the name BTCKing, Faiella would fill user orders for bitcoins through Shrem’s exchange, BitInstant, ultimately trading in over $1 million in cash, prosecutors said.

Faiella developed the scheme to try to make money over the Internet when he was confined to a bed and wanted to earn money to help his family, said his lawyer, Timothy Treanor.

He has also pointed to other people authorities investigated as being behind Silk Road, including Mark Karpeles, the former chief of the defunct bitcoin exchange Mt. Gox. Karpeles denies involvement with Silk Road.

 

“This is not a sophisticated man, Your Honor,” he said. “Mr. Faiella is not a one-man crime wave.”

Assistant U.S. Attorney Alexander Wilson said Faiella had many opportunities to stop his criminal activity but continued, even after Silk Road was shut down. Prosecutors said the $950,000 ordered forfeited was the amount of funds in the crime that were intended to promote illegal activity.

Faiella must report to prison on March 3.

The case is U.S. v. Faiella, U.S. District Court, Southern District of New York, No. 14-cr-00243. (Reporting by Nate Raymond in New York; Editing by Cynthia Osterman)

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