Wed, Jan 21, 2015

NEW YORK: A New York court Tuesday (Jan 20) handed a four-year prison sentence to a Bitcoin exchange operator who sold virtual currency used to buy drugs on the Silk Road underground website.

Robert Faiella, 55, and an accomplice were charged with conspiracy to commit money laundering and running an unlicensed money transmitting business. Faiella, who pleaded guilty in September 2014, was also ordered to pay US$950,000.

He and accomplice Charlie Shrem, 25, were accused of running a company allowing people to use cash to buy Bitcoins, and issuing US$1 million in the virtual currency that is based on a mysterious computer algorithm. Shrem was convicted to two years in prison on Dec 19.

Meanwhile Silk Road was closed by US authorities in 2013, and its alleged mastermind, Ross Ulbricht, is on trial in New York.

Manhattan federal prosecutor Preet Bharara said in a statement that from December 2011 to October 2013, Faiella sold Bitcoins on Silk Road - which only accepts payment in the virtual currency - under the pseudonym "BTCKing." Using New York-based company BitInstant, whose chief executive was Shrem, Faiella exchanged money for Bitcoins, pocketing a commission.