Charlie Shrem went from running a small online business to becoming a Bitcoin millionaire and making the cover of Forbes magazine. And then, he went to prison.
In the latest episode of Cointelegraph’s Crypto Stories, Shrem tells the story of how he founded BitInstant, grew it into a multimillion-dollar Bitcoin empire, an then was arrested for his role in it.
Shrem’s first business was an e-commerce site that only charged $5 shipping per item. The idea was his cousin’s, but Shrem used his coding skills to create the actual site. The business sold lights, toothbrushes, razors, and other assorted items.
In his free time, Shrem hung out on online message boards. That’s where he found out about Bitcoin. At the time, the only way to buy Bitcoin was to wire transfer large amounts of funds to Mt. Gox, and it took a week for the deposit to clear within the banking system. A customer who wanted to buy smaller amounts or wanted to buy instantly had no way of doing so.
Shrem met up with a person in one of these forums named “Gareth,” and the two o started a business that would allow people to buy or sell Bitcoin instantly. Their company was called “BitInstant.” To allow for instant purchases, the company deposited money into Mt. Gox and purchased Bitcoin with it. They then sold this Bitcoin off in smaller amounts to various customers.
But Shrem and his partner ran into a problem. As their transaction volume grew, they needed more and more cash to deposit into Mt. Gox, and their capital was running out quickly, as Shrem explained:
“It always needed more money because we were growing in transaction size. So in a way that an ATM needs money to sit in the machine all day, we needed money to sit in the exchanges for a week, [be]cause it would take up to a week to top up again. It was a cycle, so we always needed 7 to 8 times our transaction volume.”
The two entrepreneurs met Roger Ver, who helped them with a $100,000 capital injection to continue scaling the business. Ver also suggested the team hire Eric Vorhees. Later, Vorhees and Shrem ran across David Azar at a tech convention, who invested more. Finally, during his honeymoon, Azar met Cameron and Tyler Winklevoss on a beach and convinced them to invest in the company, which provided enough cash to allow the company to overcome its scaling difficulties.
BitInstant grew so fast it eventually became responsible for 30% of all transactions on the Bitcoin blockchain. Meanwhile, Shrem was struggling in his relationships with his family and the Jewish community he belonged to. Shrem began to feel that his religious community was stifling, especially after he fell in love with a person who was not Jewish. This frustration eventually reached a peak, and Shrem decided to leave the Jewish community.
Then, while attempting to disembark from a plane in New York, Shrem was arrested and charged with money laundering for his role in BitInstant. Authorities claimed that some BitInstant customers had used the Bitcoin they purchased from the company for illicit purposes, including criminal transactions on the Silk Road dark web marketplace.
When released on bail, Shrem was placed under house arrest and forced to live with his strict Jewish parents, who believed that his arrest was a punishment from God in response to him leaving the community. “They thought I deserved what was coming to me,” Shrem said. “They were excited to see me go to jail, because they felt that I hurt them so hard.”
That’s all for Part 1 of Charlie Shrem’s crypto story. There is more to come in part 2.
The chancellor has said she was having a “tough day” yesterday in her first public comments since appearing tearful at Prime Minister’s Questions – but insisted she is “totally” up for the job.
Rachel Reeves told broadcasters: “Clearly I was upset yesterday and everyone could see that. It was a personal issue and I’m not going to go into the details of that.
“My job as chancellor at 12 o’clock on a Wednesday is to be at PMQs next to the prime minister, supporting the government, and that’s what I tried to do.
“I guess the thing that maybe is a bit different between my job and many of your viewers’ is that when I’m having a tough day it’s on the telly and most people don’t have to deal with that.”
She declined to give a reason behind the tears, saying “it was a personal issue” and “it wouldn’t be right” to divulge it.
“People saw I was upset, but that was yesterday. Today’s a new day and I’m just cracking on with the job,” she added.
More on Rachel Reeves
Related Topics:
Ms Reeves also said she is “totally” up for the job of chancellor, saying: “This is the job that I’ve always wanted to do. I’m proud of what I’ve delivered as chancellor.”
Image: Reeves was seen wiping away tears during PMQs. Pic: PA
Asked if she was surprised that Sir Keir Starmer did not back her more strongly during PMQs, she reiterated that she and the prime minister are a “team”, saying: “We fought the election together, we changed the Labour Party together so that we could be in the position to return to power, and over the past year, we’ve worked in lockstep together.”
PM: ‘I was last to appreciate’ that Reeves was crying
The chancellor’s comments come after the prime minister told Sky News’ political editor Beth Rigby that he “didn’t appreciate” that she was crying behind him at Prime Minister’s Questions yesterday because the weekly sessions are “pretty wild”, which is why he did not offer her any support while in the chamber.
He added: “It wasn’t just yesterday – no prime minister ever has had side conversations during PMQs. It does happen in other debates when there’s a bit more time, but in PMQs, it is bang, bang, bang. That’s what it was yesterday.
“And therefore, I was probably the last to appreciate anything else going on in the chamber, and that’s just a straightforward human explanation, common sense explanation.”
Please use Chrome browser for a more accessible video player
1:03
Starmer explains to Beth Rigby his reaction to Reeves crying in PMQs
During PMQs, Tory leader Kemi Badenoch branded the chancellor the “human shield” for the prime minister’s “incompetence” just hours after he was forced to perform a humiliating U-turn over his controversial welfare bill, leaving a “black hole” in the public finances.
The prime minister’s watered-down Universal Credit and Personal Independent Payment Bill was backed by a majority of 75 in a tense vote on Tuesday evening – but a total of 49 Labour MPs voted against the bill, which was the largest rebellion in a prime minister’s first year in office since 47 MPs voted against Tony Blair’s lone parent benefit in 1997, according to Professor Phil Cowley from Queen Mary University.
Reeves looks transformed – but this has been a disastrous week for the PM
It is a Rachel Reeves transformed that appears in front of the cameras today, nearly 24 hours since one of the most extraordinary PMQs.
Was there a hint of nervousness as she started, aware of the world watching for any signs of human emotion? Was there a touch of feeling in her face as the crowds applauded her?
People will speculate. But Ms Reeves has got through her first public appearance, and can now, she hopes, move on.
The prime minister embraced her as he walked on stage, the health secretary talked her up: “Thanks to her leadership, we have seen wages rising faster than the cost of living.”
A show of solidarity at the top of government, a prime minister and chancellor trying to get on with business.
But be in no doubt today’s speech on a 10-year-plan for the NHS has been overshadowed. Not just by a chancellor in tears, but what that image represents.
A PM who, however assured he appeared today, has marked his first year this week, as Sky News’ political editor Beth Rigby put to him, with a “self-inflicted shambles”.
She asked: “How have you got this so wrong? How can you rebuild trust? Are you just in denial?”
They are questions Starmer will be grappling with as he tries to move past a disastrous week.
Ms Reeves has borne a lot of the criticism over the handling of the vote, with some MPs believing that her strict approach to fiscal rules has meant she has approached the ballooning welfare bill from the standpoint of trying to make savings, rather than getting people into work.
Ms Badenoch also said the chancellor looked “absolutely miserable”, and questioned whether she would remain in post until the next election.
Sir Keir did not explicitly say that she will, and Ms Badenoch interjected to say: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”
Downing Street scrambled to make clear to journalists that Ms Reeves was “going nowhere”, and the prime minister has since stated publicly that she will remain as chancellor “for many years to come”.