Charlie Shrem, the CEO of an exchange for Bitcoin, was arrested by federal authorities on Sunday in a money laundering bust, which highlighted the digital currency's close relationship to online black markets.
Shrem was allegedly using his legal Bitcoin business as a front while supplying more than $1 million Bitcoins for illegal purposes at Silk Road -- the now-shuttered contraband market.
The federal complaint against Shrem, who was detained at JFK airport, charges the Bitcoin exec with conspiring to commit money laundering and operating an unlicensed money transmitting business.
Tim Fernholz at Quartz raises the significant point in light of the arrest: Shrem's case poses an interesting challenge to the government, who's leniency with no-crypto financiers involved in money laundering (say, HSBC), is well known. Fernholz notes:
The other test here is for the government, which let HSBC executives simply pay fines for money laundering violations far more serious and wide-ranging than Shrem’s alleged crimes. If sophisticated financiers can launder billions of dollars for drug cartels and not go to jail, a double standard for start-up financiers using new technology to launder perhaps a million dollars for drug buyers would confirm a lot of unfortunate suspicions about the influence of the financial industry in the halls of power.