Investors who took an early interest in Bitcoin and held on to their stakes in the cryptocurrency while its price skyrocketed often stood to make an incredible amount of money. Indeed, stories of “bitcoin millionaires” who happened to hold on to an early stockpile of tokens that were acquired before the cryptocurrency phenomenon have inspired countless new investors searching for the next big investment in the space.
Among the prominent millionaires who made their fortunes off cryptocurrency, Charlie Shrem is a polarizing figure. A staunch supporter of bitcoin and the cryptocurrency space, Shrem spent two years in prison for activity related to an unlicensed money-transmitting business.
- Charlie Shrem founded BitInstant, which became a massive success, at one point accounting for roughly 30% of all bitcoin transactions.
- Shrem was arrested in 2014 and was sentenced to two years in prison for his indirect involvement with the transmission of $1 million in bitcoin to the Silk Road black marketplace.
- Following his release from prison in mid-2016, Shrem remained a vocal advocate of bitcoin and cryptocurrencies in general.
- In recent years, Shrem founded Crypto.IQ, which offers investors information, investing guidance, and market news about the cryptocurrency world.
Background in Bitcoin
Shrem, born in 1989, was a college senior in 2011 at the time bitcoin emerged. He began investing in the cryptocurrency at that time but eventually lost his stake when his storage service crashed. Partially in response to this incident, Shrem partnered with a friend and fellow cryptocurrency enthusiast named Gareth Nelson to launch BitInstant. BitInstant was designed as a user-friendly service that helped people convert money into bitcoin.
BitInstant became a massive success, at one point accounting for roughly 30% of all bitcoin transactions. In the process, it garnered significant attention from investors, including Winklevoss Capital Management. The company was in operation from September 2011 through July 2013.
In the midst of the BitInstant craze, Shrem described himself as a “bitcoin purist,” a supporter of the digital currency who backed the technology because of what he perceived as its increased security and autonomy over traditional banking institutions.
During the rise of BitInstant, Shrem became the vice chairman of the Bitcoin Foundation. In the midst of BitInstant’s soaring popularity, Shrem saw his personal wealth increase significantly.
Silk Road Involvement and Arrest
Shrem drew widespread attention in 2014 when he was arrested and sentenced to two years in prison for his indirect involvement with the transmission of $1 million in bitcoin to the Silk Road black marketplace.
In 2012, Shrem assisted Robert Faiella with the trading of more than $1 million in cash for bitcoin holdings that would then be transferred via trade to Silk Road customers. Faiella pleaded guilty to operating an unlicensed money transmitting business in late 2014 and was sentenced to two years in prison.
In the process of Shrem’s sentencing, U.S. District Judge Jed Rakoff in Manhattan ordered Shrem to forfeit nearly $1 million. Shrem officially pleaded guilty in September 2014 to aiding and abetting an unlicensed money transmitting business.
Judge Rakoff described Shrem as an individual who had “excitedly” participated in the crime. As Judge Rakoff imposed the sentence on Shrem, he remarked:
“There’s no question that Mr. Shrem, over a period of many months, was knowingly, willfully, and to some extent excitedly, even passionately involved in activity that he knew was a serious violation of the law and that was promoting the evil business of trafficking in drug.”
While Shrem could have been sentenced to up to five years in prison (the court’s probation office suggested a term of nearly that long), he ultimately remained under curfew and probation through March 2015. He was imprisoned from late March 2015 through June 2016.
BitInstant closed down in 2013, and Shrem resigned from his position with the Bitcoin Foundation after he was charged in early 2014.
Following his release from jail, Shrem reportedly worked as a dishwasher, having lost nearly all of the money he had earned from operating BitInstant through legal fees and penalties.
Post-Prison Return to Bitcoin
Since his release from prison in mid-2016, Shrem has remained a vocal advocate of bitcoin and cryptocurrencies in general. Shrem even announced plans to continue to invest in the cryptocurrency space but to diversify his holdings and transfer his bitcoin profits toward real estate investments. He has also returned to the industry with a number of new projects and ventures.
In November 2016, for example, Shrem announced the intended launch of Intellisys Capital, for which Shrem would serve as chief technology officer. The fund intended to offer cryptocurrency tokens to stand in for shares of a portfolio of manufacturing and related companies. The fund was dissolved in March 2017.
In May 2017, Shrem joined the cryptocurrency wallet company Jaxx as director of business and community development. Later in 2017, Shrem was linked with Viberate, a blockchain-based startup that aimed to disrupt the way in which musicians without agency representation managed their earnings and concert bookings.
Charlie Shrem vs. the Winklevoss Twins
A lawsuit was filed against Shrem in 2018 by Cameron and Tyler Winklevoss, who alleged that Shrem stole over 30 million dollars in Bitcoin from them. If you recall, the Winklevoss twins went through a lengthy legal battle with Facebook’s founder Mark Zuckerberg alleging that Zuckerberg stole their idea for the social network while they were friends at Harvard University. The case was settled and the twins were paid $65million, which included $45 million in equity shares of Facebook. Shortly afterward, Facebook’s stock went public through an initial public offering (IPO)cementing the Winklevoss twins’ financial fortune.
The Winklevoss twins took their money that they earned from Facebook and invested in Bitcoin becoming the first known Bitcoin billionaires. Shrem was reportedly the Winklevoss brothers’ crypto advisor who purchased Bitcoin on their behalf. However, the Winklevoss twins filed a lawsuit in 2018 against Shrem. The twins alleged that they received only a portion of the Bitcoin that they were owed and alleged that they were shorted 5,000 bitcoin by Shrem. The case was settled confidentially.
Still Active in the Cryptocurrency Industry
In 2019, Shrem started a podcast called Untold Stories, which offers a deep dive into the stories surrounding the leaders of the cryptocurrency world.
Charlie Shrem maintains an active online presence. His story has been detailed in books about the cryptocurrency sector, where he is often described as the “first felon” in the space.
Although Shrem’s activity in the cryptocurrency industry has shifted from his earliest efforts leading BitInstant, he remains a staunch and vocal supporter of bitcoin. He is commonly recruited as a speaker on subjects relating to cryptocurrency and continues to serve a number of digital currency-related companies and organizations in an advisory capacity.
Shrem hasn’t strayed too far from his passion with his latest business venture, the cryptocurrency-information website Crypto.IQ. Crypto.IQ offers investors information and market news about the cryptocurrency world and a guide to investing in digital assets including Bitcoin and Ethereum.