Charles Shrem, once a rising star in the world of Bitcoin entrepreneurialism, faced what could be his lowest moment Thursday in a 14th-floor federal court in lower Manhattan.
“I knew that what I did here was wrong,” the 24-year-old told Judge Jed Rakoff. “I’m pleading guilty because I am guilty.”
Shrem, a graduate of Yeshiva of Flatbush, pleaded guilty to one count of aiding and abetting the operation of an unlicensed money transfer business. The charge could send him to prison for up to five years.
It’s a serious charge, but it’s still better than the money laundering charge Shrem faced before a recent plea agreement. That’s what Shrem’s attorney, Marc Agnifilo, told his client’s worried parents immediately after the proceedings.
Agnifilo said he’s hoping to convince Judge Rakoff, who oversaw some of the aftermath of Bernie Madoff’s $20 billion Ponzi scheme, to sentence Shrem to less than five years. Rakoff’s decision will be announced at a Jan. 20 sentencing hearing.
Shrem was arrested on Jan. 26 at New York’s John F. Kennedy airport, returning from an e-commerce convention in Amsterdam, where he’d given a talk about Bitcoin. He was accused of laundering about $1 million in Bitcoin, money that was allegedly used to buy illegal drugs on the now defunct website Silk Road.
Bitcoin, a currency generated and existing only online, can function as a method of payment and as an investment of its own. Prior to his arrest, Shrem had become both a successful Bitcoin entrepreneur and an outspoken evangelist for the digital-age currency.
Shrem, who attended Brooklyn College, started a company in 2011 called BitInstant, which allowed people to exchange Bitcoin faster than other services. The company took off, receiving a $1.5 million investment from the Winklevoss brothers, the twins of almost-invented-Facebook fame.
Shrem claimed to be a millionaire. A Vocativ profile described a jet-setting playboy lifestyle, smoking marijuana and flying around the world to spread the good news about Bitcoin. Shrem later said he was misquoted in the article.
Shrem’s January arrest brought him crashing down. BitInstant folded and Shrem was placed under house arrest for months.
But even with the case still pending, Shrem remained defiant, decrying what he claimed was a concerted effort by banks and politicians to maintain the “status quo” and squash the Bitcoin revolution. He addressed gatherings of BItcoin believers via video-conferencing, including in robot form in Chicago.
“They want a guilty plea on their books, and that’s what they’re going to get,” Shrem told the New York Times last week.
On Thursday, a less defiant Shrem delivered that plea. In a prepared statement, Shrem said that for 11 months in 2012, he knowingly helped a man known to him as BTCKing (Shrem’s codefendant Robert Faiella, who also pleaded guilty) to process Bitcoin that was then used to buy and sell drugs on Silk Road.
Agnifilo, the lawyer, patted Shrem on the back as he wrapped up the speech. Shrem seemed shaken.
But he’s not giving up on Bitcoin, Agnifilo later told a scrum of reporters. “If God smiles on him, hopefully he’ll be back in the Bitcoin world.”
Thomas MacMillan is a freelance journalist based in New York. You can follow him on Twitter @TRMacM.