Federal law enforcement officials have arrested the CEO of a Bitcoin exchange platform and an alleged co-conspirator in connection with Silk Road, the online black market for drugs.
Charlie Shrem, CEO of BitInstant, and Robert Faiella, who allegedly used the alias "BTCKing," have been charged with helping to sell more than $1 million in Bitcoin to Silk Road users, who then used the funds to anonymously engage in illicit transactions.
The two face charges of conspiring to commit money laundering and operating an unlicensed money transmitting business. Shrem is also charged with failing to report suspicious activity.
See also: Silk Road Reborn: There's a New Dread Pirate Roberts
"Truly innovative business models don’t need to resort to old-fashioned law-breaking," U.S. Attorney Preet Bharara said in a statement. "When Bitcoin, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act."
Federal officials said they nabbed Shrem on Sunday at John F. Kennedy International Airport in New York. They picked up Faiella at his home in Cape Coral, Fla., on Monday, according to the U.S. prosecutor's statement.
Investigators say Faiella charged Silk Road users a fee to sell them Bitcoin anonymously from December 2011 to October 2013. Faiella allegedly filled the orders through Shrem's Bitcoin company, which was based in New York.
The FBI took down Silk Road, which it called "the most sophisticated and extensive criminal marketplace on the Internet," on Oct. 1, 2013. The site operated for about two and a half years, during which time it facilitated about $1.2 billion in illicit transactions in Bitcoin, according to court documents.
See also: The Silk Road Online Drug Marketplace by the Numbers
About a month after the Feds shuttered the original Silk Road, a new online black market bearing the same name and likeness launched. The new Silk Road, commonly referred to as "Silk Road 2.0," remains operational.
Mashable interviewed Shrem about his startup last year. He started BitInstant in 2011 with a $10,000 loan from his mother. Further details of the conversation are available here.
At time of publishing, BitInstant's website was down, though it did not display any kind of takedown notice like the FBI's posting after seizing Silk Road.
Both defendants are expected to appear in federal court Monday — Schrem in New York and Faiella in Florida. Below is the criminal complaint against Shrem and Faiella.
Robert Faiella and Charlie Shrem Criminal Complaint

Have something to add to this story? Share it in the comments.