A 26-year Old Bitcoin Entrepreneur Was Handed Prison Time

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A 26-year Old Bitcoin Entrepreneur Was Handed Prison Time

Post#1 » Mon Jan 16, 2017 12:01 pm

The rise of 26-year old Charlie Shrem was swift. So was his fall.

The self-professed computer geek turned divisive digital currency entrepreneur won notoriety as the founder of BitInstant. The firm took off, attracting investors like the Winklevoss twins, and helping popularize bitcoin.
Then, his whole world came crashing down. He was charged with operating an unlicensed money transmitting business. He pled guilty, and was given prison time.
He had "knowingly transmitted money intended to facilitate criminal activity- specifically, drug trafficking on Silk Road," according to a press release by the United States Attorney's Office, Southern District of New York.
Shrem got of prison earlier this year, and his experience there hasn't deterred his faith in bitcoin and blockchain, the technology behind it. In fact, an incident with a prison guard and mackerels, the currency of choice in prison, only confirmed his belief in an alternative currency system.

A computer geek
Shrem opened up about his prison experience and his past on Wall and Broadcast, a podcast hosted by TABB Group COO Alex Tabb, TABBForum producer Anna Stumpf and Vested CEO Dan Simon.
Raised in a deeply religious orthodox Jewish household, Shrem describes himself as an "outcast" at Yeshiva high school. "I just loved computers," he said in the podcast. "I would hang out in the internet chat rooms and all of the places where all socially awkward people hang out."
Shrem first heard about the concept of Bitcoin from a friend in an internet forum he was a part of. "There was no website or anything," he said in the podcast. "Only a white paper," referring to the research paper released under the pseudonym Satoshi Nakimoto that unveiled the concept.
Bitcoin is a digital currency in which transactions occur peer-to-peer, meaning no government or third party is involved. Shrem was immediately interested and purchased a few thousand bitcoin - at the time worth very little.

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He caught the entrepreneurial bug early, founding Daily Checkout, a daily deal website that sold refurbished used goods, at 18. He also attended night school at Brooklyn College and got introduced to the Austrian School of Economics, an economic theory that promotes laissez-faire ideals and the elimination of government intervention.
In his mind, something clicked. "I realized that bitcoin was taking all of that Austrian economic theory and putting it into practice," he said in the podcast.
It was on Bitcointalk.org that he got the idea for a way to make the purchasing of bitcoin faster and more accessible to the every day consumer. He launched BitInstant, which partnered with payment processors that had physical locations at CVS, Duane Reade, Walmart, Walgreens and 7-11, among others. The site allowed people to buy small amounts of bitcoin (with an average ticket size of $300-500) and charged customers a small fee for each transaction.
"Within a few months, we enabled people to be able to buy bitcoin at almost a million locations in the US," Shrem said in the podcast. "And overnight volume exploded."
The company achieved an average growth rate of 1.5x per month, according to Shrem, with advertising limited to word of mouth. At one point, the company was facilitating transactions worth a million dollars a day, he said.
The growth of BitInstant attracted investors like the Winklevoss twins and angel investor Roger Vere. They moved into bigger offices, shrouded in secrecy. "We needed an army security guard, our own floor, and shaded windows," he said.
Soon the two man band become a 30 person office, and he admits in the podcast interview that he let the success get to his head.

phunter
Posts: 55

Re: A 26-year Old Bitcoin Entrepreneur Was Handed Prison Time

Post#2 » Fri Jan 27, 2017 2:04 pm

The rise of 26-year old Charlie Shrem was swift. So was his fall. The self-professed computer geek turned divisive digital currency entrepreneur won notoriety as the founder of BitInstant. The firm took off, attracting investors like the Winklevoss twins, and helping popularize bitcoin.
Then, his whole world came crashing down. He was charged with operating an unlicensed money transmitting business. He pled guilty, and was given prison time.

james
Posts: 55

Re: A 26-year Old Bitcoin Entrepreneur Was Handed Prison Time

Post#3 » Fri Jan 27, 2017 2:04 pm

Shrem opened up about his prison experience and his past on Wall and Broadcast, a podcast hosted by TABB Group COO Alex Tabb, TABBForum producer Anna Stumpf and Vested CEO Dan Simon.

Raised in a deeply religious orthodox Jewish household, Shrem describes himself as an "outcast" at Yeshiva high school. "I just loved computers," he said in the podcast. "I would hang out in the internet chat rooms and all of the places where all socially awkward people hang out."

sberry
Posts: 55

Re: A 26-year Old Bitcoin Entrepreneur Was Handed Prison Time

Post#4 » Fri Jan 27, 2017 2:05 pm

Shrem had knowingly facilitated transactions to a re-seller, Robert Faiella, whose customers were using the Silk Road, an underground bitcoin only marketplace where people buy and sell illegal drugs. The re-seller was also trying to deposit more money than the new money transmitter laws allowed for, and these transactions were done behind the scenes to get around reporting requirements.

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