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Bitcoin bigwig goes to prison in Silk Road case

BitInstant CEO Charlie Shrem is sentenced to two years prison time, despite asking to be let off free to "change the world."

BitInstant CEO Charlie Shrem has been sentenced to two years in prison in a case involving money laundering. Bitcoin

Bitcoin evangelist Charlie Shrem was sentenced to two years in prison on Friday after being charged with laundering money through the notorious online drug bazaar Silk Road.

Shrem pleaded guilty to one count of aiding and abetting an unlicensed money transmission in September. After striking this plea deal with the government, Shrem faced up to six years in prison. However, US District Judge Jed Rakoff decided two years would be sufficient. The judge denied Shrem's request to be let off without any prison time so he could "change the world" by showing he had learned from his mistakes, according to Bloomberg.

"I screwed up," Shrem told the judge in court on Friday, according to Bloomberg. "The bitcoin community, they're scared and there is no money laundering going on anymore. They're terrified. Bitcoin is my baby, it's my whole world and my whole life, it's what I was put on this earth to do. I need to be out there. If your honor grants me that, I can be out there in the world, making sure that people don't do the same stupid things that I did."

Prosecuting attorney Preet Bharara submitted a filing to Judge Rakoff on Wednesday urging the judge to sentence Shrem to prison time.

"The story of this case is not one of tragedy, but farce," Bharara wrote. "Throughout the year 2012, Charlie Shrem made a mockery of the anti-money laundering laws."

Shrem, who was the CEO of bitcoin exchange company BitInstant, was arrested in New York in January in a multi-agency crackdown led by the US Attorney's office, the Drug Enforcement Administration and the Internal Revenue Service. Another prominent bitcoin figure, Robert Faiella, was also arrested in the sting.

According to the agencies, the men engaged in a scheme to sell over $1 million in bitcoins for use on the now shuttered underground drug marketplace Silk Road. From December 2011 to October 2013, the agencies say, Faiella was in charge of a bitcoin exchange on Silk Road called BTCKing, in which he took users cash, funneled it through Shrem's company and gave the users bitcoins in return.

Both men were initially charged with "conspiring to commit money laundering, and operating an unlicensed money transmitting business." Shrem was also charged with failing to report suspicious activity in violation of the Bank Secrecy Act.

Faiella pleaded guilty to one count of operating an unlicensed money transmitting business and is still waiting for his sentencing. Ross Ulbricht, the alleged mastermind behind Silk Road, was arrested in October 2013. He has pleaded not guilty and his trial is scheduled to begin in January.