Charlie Shrem, the pioneer of the Bitcoin has been charged by federal officials with money laundering and on Tuesday resigned from the Bitcoin Foundation board of directors. The foundation is the trade group promoting the unregulated cybercurrency.
Prosecutors allege that Shrem, who is the CEO of Bitlnstant.com, the Bitcoin exchange, aided a vendor on the illegal drug marketplace online, Silk Road, to exchange cash for the Bitcoin.
Shrem was one of the early adopters of the online currency and was one of the Bitcoin Foundation founders. He resigned on Tuesday after submitting his resignation to the board, said Jinyoung Lee England a spokesperson for the foundation.
Bitcoin was launched in 2009. It is generated by a computer algorithm and can be traded person to person instead of through any banks. In the U.S., the currency is not considered legal. An increasing number of businesses now accept the cybercurrency, including businesses based on the Web, restaurants and one university.
Shrem, who is 24, and Robert Faiella who is 52 have been charged by prosecutors for selling over $1 million worth of Bitcoin to people that did business on the now shuttered Silk Road site. Silk Road required its buyers and its sellers to make transactions in Bitcoin.
Court documents said the Faiella ran a Bitcoin exchange underground on the site Silk Road from December 2001 unit the day federal officials shuttered the site. He is alleged to have filled orders for the Bitcoins through BitInstant, the company founded by Shrem.
On Monday, Shrem was arrested by federal authorities at New York City’s John F. Kennedy International Airport.
Shrem claims a net worth of more than $6 million. He is currently free on $1 million bond but under house arrest.
The Bitcoin Foundation has emphasized that the indictment does not focus on the legitimacy of the virtual currency and it will work continuously on the standardizing of the currency to facilitate its adoption.
