Products allegedly available through the Silk Road site. (Photo: AP) 
 
 A Secret Service agent and a DEA agent with lead roles in the investigation to take down the Internet drug bazaar Silk Road allegedly stole proceeds from the underground site and hid their booty in offshore accounts. 
 
 Former DEA agent Carl Force, 46, of Baltimore, the task force agent charged with going undercover to communicate online with Silk Road operator Ross Ulbricht, known as Dread Pirate Roberts, allegedly used several online aliases to extort hundreds of thousands of dollars worth of bitcoin from Ulbricht, according to a criminal complaint unsealed Monday. Force is charged with money laundering, wire fraud, theft and conflict of interest. 
 
 Prosecutors also charged Shaun Bridges, 32, of Laurel, Md., a former special agent with the U.S. Secret Service, who allegedly accessed Silk Road accounts using password information from a Silk Road customer service representative arrested in a drug sting. Bridges, who joined the Secret Service in 2009, is charged with wire fraud and money laundering. 
 
 The FBI shut down Silk Road and arrested Ulbricht on Oct. 2, 2013. Silk Road, a dark Web black market that traded in illegal drugs, counterfeit IDs and computer hacking software, required its buyers and sellers to do business in bitcoin, an anonymous digital currency that is difficult to trace. 
 
 A federal jury in New York convicted Ulbricht last month on drug conspiracy charges. Ulbricht, who will be sentenced in May, was also the target of an investigation in Maryland. Force and Bridges worked on the Maryland investigation. 
 
 Prosecutors say Force, in addition to his official undercover identity as "Nob," created several unauthorized online aliases, so he could conduct complex bitcoin transactions to steal from the government and Ulbricht. 
 
 In one transaction, Force, using his second alias, allegedly demanded Ulbricht pay him $250,000 in bitcoin not to disclose information to the government. Posing as a woman named Carla under the alias "French Maid," Force allegedly offered to sell Ulbricht information about the government's investigation in exchange for $100,000 worth of bitcoin. 
 
 Ulbricht paid the money, and Force deposited it into a personal account, IRS Special Agent Tigran Gambaryan wrote in an affidavit. Force allegedly converted some bitcoin to dollars and wired the money to his personal overseas bank account in Panama, the affidavit said. 
 
 Force also worked for and invested $110,000 in the California-based digital currency exchange company CoinMKT while still working for the DEA. The company featured Force in its pitches to venture capital investors as CoinMKT's anti-money laundering and compliance officer. 
 
 E-mails between Force and CoinMKT's CEO indicated that Force planned to stay at the DEA until the bitcoin exchange "hits it 'big time.' " 
 
 "I have a lot of down time at DEA so I am confident that I can handle all that needs to be done regarding Legal and Compliance on a daily basis," Force wrote. 
 
 Prosecutors say Force used his position at the DEA to steal money from accounts at CoinMKT. In one instance, Force allegedly directed CoinMKT to freeze a customer account. He then seized 223 bitcoins worth about $297,000 and transferred them to his personal Bitstamp digital currency account. He then exchanged the bitcoins for dollars and put the money in his personal checking account, court papers say. 
 
 This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah. (Photo: Rick Bowmer, AP) 
 
 Force, who earned about $150,000 a year as a DEA agent, made $757,000 in deposits to his personal bank account from April 2013 to May 2014, court papers show. During that time, Force paid off his mortgage and a government thrift savings loan while investing in real estate and bitcoin businesses, court papers say. 
 
 Authorities arrested Force on Friday. Force, a 15-year veteran, resigned from the DEA in May. He is in jail and will appear in court Thursday for a detention hearing. 
 
 Bridges, the computer forensics expert on the Baltimore investigation, allegedly stole more than $800,000 worth of bitcoin that he controlled during the Silk Road investigation and placed it into an account with Mt. Gox, a digital currency exchange in Japan. Silk Road reported a massive bitcoin theft Jan. 25, 2013, the same day Bridges attended an interview with the Silk Road administrator caught in the sting. 
 
 Bridges allegedly wired the funds to a personal U.S. investment account through nine transfers from March 6, 2013, to May 7, 2013. The final transfer on May 7, 2013, came two days before he personally sought a $2.1 million seizure warrant for Mt. Gox's accounts, court papers say. 
 
 Bridges, who joined the Secret Service in 2009, resigned from the Secret Service on March 18. He surrendered to authorities Monday and was released under pretrial supervision. 
 
 Bridges intends to fight the charges, his attorney Steven H. Levin said. Bridges "had an unblemished career in law enforcement for several years. He maintains his innocence," Levin said. 
 
 A bitcoin logo is displayed at the Inside Bitcoins conference and trade show April 7, 2014, in New York. Bitcoin users exchange cash for digital money using online exchanges, then store it in a computer program that serves as a wallet. The program can transfer payments directly to merchants or individuals around the world, eliminating transaction fees and the need for bank or credit card information. (Photo: Mark Lennihan, AP) 
 
 Read or Share this story: http://usat.ly/1bJtlJk ||||| UNITED STATES ATTORNEY’S OFFICE 
 
 Southern District of New York 
 
 U.S. ATTORNEY PREET BHARARA 
 
 FOR IMMEDIATE RELEASE Monday, January 27, 2013 http://www.justice.gov/usao/nys CONTACT: U.S. ATTORNEY’S OFFICE James Margolin, Jerika Richardson Jennifer Queliz (212) 637-2600 IRS-CI Gregory Tranchina (212) 436-1687 
 
 DEA Erin McKenzie-Mulvey (212) 337-2906 
 
 MANHATTAN U.S. ATTORNEY ANNOUNCES CHARGES AGAINST BITCOIN EXCHANGERS, INCLUDING CEO OF BITCOIN EXCHANGE COMPANY, FOR SCHEME TO SELL AND LAUNDER OVER $1 MILLION IN BITCOINS RELATED TO SILK ROAD DRUG TRAFFICKING 
 
 Defendants Sold Bitcoins to be Used to Buy and Sell Illegal Drugs Anonymously on the Silk Road Drug Trafficking Website Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, the Acting Special-Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced the unsealing of criminal charges in Manhattan federal court against ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground Bitcoin exchanger, and CHARLIE SHREM, the Chief Executive Officer and Compliance Officer of a Bitcoin exchange company, for engaging in a scheme to sell over $1 million in Bitcoins to users of “Silk Road,” the underground website that enabled its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. Each defendant is charged with conspiring to commit money laundering, and operating an unlicensed money transmitting business. SHREM is also charged with willfully failing to file any suspicious activity report regarding FAIELLA’s illegal transactions through the Company, in violation of the Bank Secrecy Act. SCHREM was arrested yesterday at John F. Kennedy International Airport in New York, and is expected to be presented in Manhattan federal court later today before U.S. Magistrate Judge Henry Pitman. FAIELLA was arrested today at his residence in Cape Coral, Florida, and is expected to be presented in federal court in the Middle District of Florida. Manhattan U.S. Attorney Preet Bharara said: “As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on 
 
 the dark web drug site, Silk Road. Truly innovative business models don’t need to resort to oldfashioned law-breaking, and when Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would coopt new forms of currency for illicit purposes.” DEA Acting Special-Agent-in-Charge James J. Hunt said: “The charges announced today depict law enforcement's commitment to identifying those who promote the sale of illegal drugs throughout the world. Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way. Drug law enforcement’s job is to investigate and identify those who abet the illicit drug trade at all levels of production and distribution including those lining their own pockets by feigning ignorance of any wrong doing and turning a blind eye.” IRS Special-Agent-in-Charge Toni Weirauch said: “The government has been successful in swiftly identifying those responsible for the design and operation of the ‘Silk Road’ website, as well as those who helped ‘Silk Road’ customers conduct their illegal transactions by facilitating the conversion of their dollars into Bitcoins. This is yet another example of the New York Organized Crime Drug Enforcement Strike Force’s proficiency in applying financial investigative resources to the fight against illegal drugs.” According to the allegations contained in the Criminal Complaint unsealed today in Manhattan federal court: From about December 2011 to October 2013, FAIELLA ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. Upon receiving orders for Bitcoins from Silk Road users, he filled the orders through a company based in New York, New York (the “Company”). The Company was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service. FAIELLA obtained Bitcoins with the Company’s assistance, and then sold the Bitcoins to Silk Road users at a markup. SHREM is the Chief Executive Officer of the Company, and from about August 2011 until about July 2013, when the Company ceased operating, he was also its Compliance Officer, in charge of ensuring the Company’s compliance with federal and other anti-money laundering (“AML”) laws. SHREM is also the Vice Chairman of a foundation dedicated to promoting the Bitcoin virtual currency system. SHREM, who personally bought drugs on Silk Road, was fully aware that Silk Road was a drug-trafficking website, and through his communications with FAIELLA, SHREM also knew that FAIELLA was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated FAIELLA’s business with the Company in order to maintain FAIELLA’s business as a lucrative source of Company revenue. SHREM knowingly allowed 
 
 2 
 
 FAIELLA to use the Company’s services to buy Bitcoins for his Silk Road customers; personally processed FAIELLA’s orders; gave FAIELLA discounts on his high-volume transactions; failed to file a single suspicious activity report with the United States Treasury Department about FAIELLA’s illicit activity, as he was otherwise required to do in his role as the Company’s Compliance Officer; and deliberately helped FAIELLA circumvent the Company’s AML restrictions, even though it was SHREM’s job to enforce them and even though the Company had registered with the Treasury Department as a money services business. Working together, SHREM and FAIELLA exchanged over $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road. In late 2012, when the Company stopped accepting cash payments, FAIELLA ceased doing business with the Company and temporarily shut down his illegal Bitcoin exchange service on Silk Road. FAIELLA resumed operating on Silk Road in April 2013 without the Company’s assistance, and continued to exchange tens of thousands of dollars a week in Bitcoins until the Silk Road website was shut down by law enforcement in October 2013. * * * 
 
 FAIELLA, 52, of Cape Coral, Florida, and SHREM, 24, of New York, New York, are each charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison. SHREM is also charged with one count of willful failure to file a suspicious activity report, which carries a maximum sentence of five years in prison. Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office. Mr. Bharara also noted that the investigation remains ongoing. The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Asset Forfeiture Unit is in charge of the forfeiture aspects of the case. 
 
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 The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty. 14-024 ### 
 
 4 ||||| In February, after a trial that lasted 13 days, Ross Ulbricht was convicted of running the online drug marketplace Silk Road, which utilized the digital currency bitcoin for its payments. The media coverage of the trial, and the final result, could be seen as bad for bitcoin. It fed into an image that many in the public still have of the currency: that it is unsafe, and is used for crime. 
 
 But while Ulbricht was the most prominent case thus far and is the reigning symbol of bitcoin’s darker uses (he even had the ominous alias “Dread Pirate Roberts”), a different defendant pleaded guilty to bitcoin-related crimes two months earlier than him: Charlie Shrem. 
 
 Shrem was no shadowy figure, operating in the dark. He was a known name and an early advocate in the bitcoin community. In 2011 he founded the bitcoin exchange BitInstant, which had a range of legitimate investors, including the Winklevoss brothers. But in January, 2014, he was arrested (in dramatic fashion, at New York’s JFK Airport) and, last April, charged with failing to report suspicious banking activity, laundering money from BitInstant accounts (some $1 million) for use by Silk Road customers, and operating an unlicensed money-transmitting business. 
 
 That latter charge is significant moving forward, as the New York Department of Financial Services is currently still at work revising BitLicense, its proposed set of regulations that will govern bitcoin businesses that are transmitting money on behalf of others. The Times wrote that Shrem, “has come to symbolize the government’s crackdown on the virtual currency,” but in fact, there has been, for now, very little crackdown, though some bitcoin supporters worry that it is on the way in earnest. 
 
 While the salacious headlines that follow the prosecution of a bitcoin entrepreneur are unquestionably a negative for the community, some in that world see the prosecution itself as a positive sign. “Silk Road and [other crimes] are obviously a negative, but there’s a silver lining in the sense that when people do bad things and think they can do it because it’s in bitcoin, and they get arrested, there’s a message there that you’ll still get caught,” says Tyler Winklevoss. “What I take away from it is that traditional law enforcement tactics and measures are working, even in the bitcoin world. Technologies aren’t good or bad, they’re neutral. People use email for bad things, people use U.S. dollars for bad things.” 
 
 Shrem pleaded guilty to a reduced charge of aiding and abetting an unlicensed money transmitting service, and was sentenced in December to two years in prison. Today, the 25-year-old reports to USP Lewisburg, in Lewisburg, Penn. It is a high-security federal prison, but Shrem will be in the minimum-security satellite camp. (If you suspect that Shrem will have a cushy time of it there, read our exclusive, revealing interview with a white-collar inmate at a minimum-security prison.) 
 
 Since the moment he was sentenced, Shrem has been upbeat about his fate. On the day of sentencing, he tweeted: “Considering I was facing 30 years, justice has been served.” He then added that he was happy the judge in the case “admires my brainpower.” He has claimed as his own the title of bitcoin’s “first felon” and added the phrase to his Twitter bio, in which he also calls himself a “pioneer,” “crusader,” and “dreamer.” 
 
 Last week, Shrem agreed to a phone interview with Fortune, but had to cancel. He has appeared on radio shows and spoken to the press, and discussed his expectations in an extensive blog post from earlier this month entitled, “So, I’m going to prison—reflections from bitcoin’s first felon.” In the post, Shrem writes, “I don’t look for sympathy, I did the crime and I will do the time.” He says that the prison facility where he’s headed “seems like a nice place, it offers outstanding recreational facilities including a walking track; a basketball court; softball fields and exercise equipment.” And on his Twitter account, he has appeared to even relish the imminent experience. On Sunday he posted a countdown (“21 hours until prison…”) and said, enthusiastically, “Follow my twitter when I check in to prison tomorrow! A few people will be running it, will post updates from behind the walls.” 
 
 In Shrem’s blog post, he recounts the many ways he remained involved in bitcoin in the past year, including while he was on house arrest. He served as a consultant to a couple bitcoin companies, made speeches, and met with venture capitalists. He remains a diehard bitcoin believer. It appears extremely likely that he will return to the bitcoin world the moment he emerges from prison. The question is where the technology will be by then, and how much the landscape will have changed—and whether increased regulation to guard against crimes like Shrem’s will have had a major impact.
– What do you do if you're a federal agent who's part of an undercover operation to bust up a booming black-market drug-dealing website? One thing you don't usually do is skim a goodly portion of said site's digital currency into your pockets, but two former federal agents are accused of doing just that during their investigations that eventually led to the 2013 Silk Road sting, USA Today reports. Ex-DEA agent Carl Force and ex-Secret Service agent Shaun Bridges were charged with wire fraud and money laundering in a complaint unsealed today, the New York Times reports. The document for the recent bitcoin probe mentions that both agents were part of a Baltimore-based task force that ended up securing an indictment for Silk Road's "Dread Pirate Roberts," aka Ross Ulbricht. Force, a 15-year DEA veteran who resigned in 2014 when his alleged actions came to light, "stole and converted to his own personal use a sizable amount of bitcoins," the complaint notes, per the Times; he allegedly did so by fabricating online personas, adds USA Today. Bridges allegedly took $800,000 of the investigation's bitcoin under his jurisdiction, dumped it into a Mt. Gox account, then withdrew the funds from the Japanese currency exchange right before he went after the exchange with a seizure warrant; he had been with the Secret Service as a special agent for six years before resigning on March 18. Meanwhile, 25-year-old BitInstant co-founder Charlie Shrem became the first bitcoin felon to report to prison, starting his two-year sentence today at Pennsylvania's USP Lewisburg facility, Fortune notes.