Charlie Shrem Saga Ends With Two-Year Sentence in New York Court

Charlie Shrem has been sentenced to two years in prison after pleading guilty to aiding and abetting an unlicensed money transmitting business.

AccessTimeIconDec 20, 2014 at 12:37 a.m. UTC
Updated Sep 11, 2021 at 11:24 a.m. UTC
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Former BitInstant CEO and Bitcoin Foundation board member Charlie Shrem was sentenced this afternoon to two years in prison after pleading guilty to aiding and abetting the operation of an unlicensed money transmitting business.

Shrem will also serve three years of supervised release in addition to the prison sentence.

Judge Jed Rakoff, who presided over the case, rejected the defense's plea for probation only, but stopped short of imposing a harsher sentence based on the charges at hand.

Shrem acknowledged the illegality of his actions, stating in court:

“I have no excuses for what I did. I broke the law and I broke it badly."

A shorter sentence

In September, Shrem agreed to a forefeiture of $950,000 as part of a plea bargain that would provide a jail term of up to 60 months, three years longer than the sentence he received today.

Defense counsel Marc Agnifilo appealed for Rakoff to consider the significance of Shrem's age, maturity and experience today and when he committed his illicit actions when issuing the ruling. Shrem was 22 years old at the time of the crime, and is 25 years old today.

BitInstant processed almost 50,000 orders in its time, Agnifilo said, but Shrem only violated his anti-money laundering (AML) duties at the company through his actions with co-accused Robert Faiella, who allegedly ran a bitcoin exchange service on Silk Road using the alias 'BTCKing'.

Agnifilo added that Shrem has committed no further offenses in the 15 months since he ended his communication with Faiella. Further, he noted that Shrem has made himself available to help community members and regulators looking to help grow the bitcoin ecosystem.

However, the prosecutor, US attorney Serrin Turner, said he found little to no distinction between the actions of both Shrem and Faiella, arguing that both crimes led to serious drug trafficking; that he was “moving drug money – not in the traditional way – online – but moving it nevertheless”.

The humanistic aspect

Throughout the hearing, Agnifilo addressed the use of human beings as tools to attain social policy, as he argued that the length of the sentence should not be more significant than the certainty of being caught.

Rakoff made the same distinction. Although the sentence must be sufficient, he said, sentences should not “be of such length that [they] destroy a man” or fail to account for his more laudable qualities.

“Short prison time has much of the general effect of long prison time,” he added.

Rakoff also called Americans “highly moralistic” which gives them a tendency to take pleasure in high sentences that “fail to take into account the human being”.

For that reason, he said the sentencing guidelines are “irrational and silly” and “not worthy of consideration” since they would recommend a “bizarre” sentence greater than what Congress would give.

Playing by the rules

The case against Shrem has been a beacon to bitcoin community businesses warning them about the significance of regulatory compliance and following the rules of the game, which was also a theme that arose during court.

Agnifilo said:

“This is the big leagues now, this is American business. To be an American business means to be a grownup, follow the rules. That message is loud and clear.”

Shrem stated that he can play a role in preventing further abuses in the digital currency space, arguing:

“No one [in bitcoin] is doing this anymore, they’re terrified … Bitcoin needs to stay away from criminals, from people taking actions that I did […] I need to be out there … helping the world to make sure they don't do a stupid thing like I did.”

Agnifilo later said that this case is a tremendous part of what will make bitcoin succeed, citing some of the applications that the digital currency and technology offers the global population and how much the ecosystem has evolved in its short life.

He also said that while he admittedly knows little about bitcoin, he’s certain that “if it gets too close to criminals, it’s not going anywhere, it’s going to die”, and that the only way it can live up to its true potential is to get criminals out of it.

Drug buyers vs drug dealers

Addressing Turner, Rakoff commented that there is a difference between helping drug users who may be drug addicts get their fix and helping drug dealers promote their products. The former, he said, is not as morally repellent as the latter.

Rakoff continued by saying that addicts are victims, and even though they may have contributed to their own victimization, they’ll go through any measure to get their fix and that one “can’t help but feel like they should be the object of some sympathy”.

On the contrary, “drug dealers are among the most repulsive human being that can be encountered,” Rakoff said, adding that Congress has said for many years “that we can’t end drug trafficking without getting into the economics of it”.

The sentence, he concluded on the matter, should therefore be directed at the moral quality of someone who enters into the situation that Shrem did.


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