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Bitcoin exchange joins HSBC in money laundering for drug sales

Photo by George Frey/Getty Images

On Jan. 27, the Department of Justice filed formal charges against Charlie Schrem, the owner and CEO of, alleging that the Bitcoin exchange laundered $1 million USD in cash via Bitcoins for drug sale proceeds. This is the second major case in over a year for the DOJ tied to drugs and money laundering, with the first proceedings ending in a large fine for HSBC, and no jail time for anyone associated with the bank.

The U.S. Attorney's office in Manhattan said in a statement that authorities arrested Charlie Schrem, chief executive officer of the exchange, on Sunday and Robert Faiella, who ran an underground Bitcoin exchange called BTCKing, on Monday. The two were charged with conspiring to commit money laundering and operating an unlicensed money transmitting business. - Zerohedge

The question now becomes is today's indictment against the CEO of a Bitcoin exchange being done as retribution against the growing digital currency, or is it simply a prudent and lawful action to stop portions of the underground and black market drug trade? If justice is to fit the crime according to the United States legal system, then Charlie Schrem should be allowed to broker a deal where he pays a symmetrical fine for using a financial product to support an illicit activity, and be freed of any personal liability, as HSBC bankers involved in the same form of crime were.

HSBC was found to have laundered over $670 billion over the course of four years, and this makes BitInstant's total amount pale in comparison. HSBC was eventually fined $1.9 billion in an arranged agreement, which equates to 3/100% of the total amount laundered through their institution.

In today's government, where corporate and political interests are normally aligned and protected, no major banker has been personally indicted and imprisoned since the credit crisis of 2008. However, this quid pro quo form of justice is unlikely to be the modus operandi with Bitcoin, as the digital currency is seen more as a threat, than as a benefit to America's hegemony over the global reserve currency. And thus it is very likely that the Department of Justice will be seeking personal retribution from, and its CEO Charlie Schem, simply on the grounds of using the indictment as a warning to the ever growing world of Bitcoin and other digital currencies.