The chief executive of a Bitcoin startup backed by the Winklevoss twins was arrested Monday and charged with laundering money through a notorious drug-trafficking site.
The Department of Justice said that it had charged Robert M. Faiella and Charlie Shrem with selling $1 million worth of Bitcoins to people attempting to buy and sell drugs on the Silk Road black market website.
Shrem is CEO of BitInstant, a Bitcoin exchange that counts the Winklevoss twins as its investors. The pair invested $1.5 million in the company last year.
The BitInstant website was offline Monday morning.
Shrem is also vice chairman of the Bitcoin Foundation and just this last weekend was a featured speaker at a Bitcoin conference in Miami.
Shrem was arrested at John F. Kennedy International Airport in New York and charged with money laundering, according to a news release from the Justice Department.
Shrem faces an additional charge of failing to file a suspicious activity report, which could bring another five years in prison.
According to the Justice Department, Faiella ran an underground Bitcoin exchange on Silk Road. When he received orders for Bitcoins, he would fill them through BitInstant and then sell them to Silk Road users for a profit.
As CEO and chief compliance officer of BitIntant, Shrem allegedly knew the purpose of Faiella's exchanges. In addition, the government says Shrem himself purchased drugs on Silk Road.