The chief executive of a bitcoin startup was arrested Monday and charged with laundering money through a notorious drug-trafficking site.
The Department of Justice said that it had charged Robert Faiella and Charlie Schrem with selling $1 million worth of bitcoins to people attempting to buy and sell drugs on the Silk Road black market website.
Schrem is CEO of BitInstant, a bitcoin exchange that counts the Winklevoss twins of Facebook fame as its investors. The pair invested $1.5 million in the company last year.
The BitInstant website was offline Monday morning.
"Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way," James J. Hunt of the U.S. Drug Enforcement Administration said in the news release.
Silk Road was an online black market where people tried to anonymously buy and sell illegal goods such as drugs and guns. The FBI shut down Silk Road last October and seized millions of dollars' worth of bitcoins.
Since that bust, federal law enforcement agencies have been using Silk Road's records to track down others involved in illegal activity.
That information apparently led them to Schrem and Faiella.
Faiella, 52, of Cape Coral, and Schrem, 24, of New York City, were each charged with one count of conspiracy to commit money laundering and one count of operating an unlicensed money-transmitting business. The charges would carry a combined maximum of 25 years in prison.