private jets for Bitcoin.
“It’s fucking, excuse my
language, it’s an amazing
idea,” Charlie said. A few
weeks
earlier,
he
had
splurged and sold some of his
Bitcoins to pay for a private
jet to take him and Courtney
to the Bahamas.
He also was still working
with the Bitcoin Foundation,
preparing for its second
annual conference, this one in
Amsterdam.
“We’re looking for a
celebrity speaker,” Charlie
told Nic. “I want to get like
Snoop Dogg to come.”
“How
about
Richard
Branson?”
Nic
asked,
referring to the mogul who
had recently announced that
he
would
be
accepting
Bitcoin for tickets on Virgin
Galactic,
his
commercial
space company.
“A lot of these guys aren’t
even out of reach,” Charlie
said.
A few days after seeing
Nic, Charlie and Courtney
flew to Amsterdam. They
stopped by the convention
center where the foundation’s
conference would be held.
But the main purpose of the
trip
was
a
technology
conference in Utrecht that
had paid Charlie $20,000 to
speak about Bitcoin. Flying
home from the gig, in
business
class,
Charlie
couldn’t help feeling that,
after all his earlier struggles,
things were starting to work
out again.
After landing in New
York, he had just presented
his passport to the customs
officer when another agent
appeared, seemingly out of
nowhere, and said, “Mr.
Shrem, come with us.” When
Charlie asked why, the agent
said, simply, “We’ll explain
everything,” and led him to a
holding room. The agent
there
handed
Charlie
a
warrant for his arrest and told
him he was facing charges of
money laundering, unlicensed
money
transmission,
and
failure to report suspicious
transactions.
When Charlie asked for
more information he was told
the agents would be happy to
tell him more if he’d just
answer
a
few
of
their
questions. He knew better
than to talk without a lawyer
present and so he was left not
knowing what conduct had
led to the charges. He was
allowed into a larger holding
room, where Courtney was
waiting, crying hysterically.
He calmly told her to call the
lawyer
who
had
been
working on BitInstant and not
to answer any questions the
federal agents might ask her.
While he was talking to her,
he was put in cuffs and led
away to a black SUV, which
took off in a caravan of police
cars and traveled to the Drug
Enforcement Administration
headquarters in downtown
Manhattan.
After
getting
booked, Charlie was taken to
the Metropolitan Correctional
Center,
where
he
was
changed
into
an
orange
jumpsuit and locked up in a
cell by himself. He had the
rest of the night to cry and
nervously think through all
the things that might have
gotten him here and all the
ways it might play out.
In
the
morning,
the
marshals took him to a
holding cell under the federal
courthouse, where he met
with one of the lawyers he
had
worked
with
at
BitInstant, whom Courtney
had
called.
He
learned,
finally, that the charges
stemmed from his work in
early 2012, selling Bitcoins to
BTC
King,
the
money
changer who had helped Silk
Road
customers
secure
Bitcoins to buy drugs. The
prosecutors had e-mails in
which Charlie acknowledged
knowing what the coins were
being used for and doing it
anyway without filing any
suspicious-activity
reports
with regulators.
Charlie’s
lawyer
explained the basics. The
lawyer had reached Charlie’s
parents and they were ready
to put up their house in
Brooklyn as collateral for the
$1 million bail. But they had
conditions:
he
had
to
apologize to them and break
up with Courtney. When
Charlie
resisted
the
conditions, his lawyer told
him that he needed to bite the
bullet and do what it took to
get out.
Once he was released,
with an electronic ankle
bracelet on, Charlie found his
parents and Courtney in the
courthouse hallway. They had
never met before and clearly
had not been talking. When
he asked his parents if
Courtney could come home
with them, they reiterated that
if he wanted to be with
Courtney they would rescind
the bail and he would go back
to jail. He privately told
Courtney, who was weeping,
that he would try to figure
something out and call her
later. Outside, he climbed
into his parents’ black Lexus
SUV and headed toward his
childhood home.
While Charlie had been
sitting in the courthouse, the
United States attorney in
Manhattan, Preet Bharara, the
most powerful prosecutor in
the country and the same man
who had filed charges against
Ross Ulbricht four months
earlier, publicly announced
that his office had unsealed
criminal
charges
against
Charlie and the Florida man
known as BTC King, Robert
Faiella.
At
a
press
conference, Bharara said: “If
you want to develop a virtual
currency or a virtual currency
exchange business, knock
yourself out. But you have to
follow the rules. All of them.”
Charlie’s offense was not
of the magnitude that usually
caused a federal prosecutor to
hold a press conference, but
Bharara clearly wanted to
make a statement that he was
taking a close look at virtual
currencies.
THE DAY AFTER Charlie’s
release, and less than a mile
from where he’d been in jail,
the Winklevoss twins stepped
out of a black car in
downtown
Manhattan
to
testify
at
the
latest
government hearing about
Bitcoin. This one was being
held
in
the
somewhat
rundown offices of New York
State’s
top
financial
regulator, Benjamin Lawsky,
who had subpoenaed all the
major Bitcoin companies and
investors back in the summer
of
2013.
Lawsky
had
previously
worked
in
Bharara’s office. The arrest of
Charlie and Bharara’s press
conference, just a day before
Lawsky’s hearing, looked to
many Bitcoiners like a piece
of political theater, designed
to give Lawsky an excuse for