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.
Nigel Farage has successfully exploited the Commons recess to “grab the mic” and “dominate” the agenda, Harriet Harman has said.
Speaking on Sky News’ Electoral Dysfunction podcast, the Labour peer said that the Reform UK leader has been able to “get his voice heard” while government was not in “full swing”.
Mr Farage used a speech this week to set himself, rather than Kemi Badenoch’s Tories, up as the main opposition to Sir Keir Starmer at the next election.
Baroness Harman said: “It’s slightly different between opposition and government because in government, the ministers have to be there the whole time.
“They’ve got to be putting legislation through and they kind of hold the mic.
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“They can dominate the news media with the announcements they’re making and with the bills they’re introducing, and it’s quite hard for the opposition to get a hearing whilst the government is in full swing.
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“What we used to do when we were in opposition before 1997 is that as soon as there was a bank holiday and the House was not sitting, as soon as the half-term or the summer recess, we would be on an absolute war footing and dominate the airwaves because that was our opportunity.
“And I think that’s a bit of what Farage has done this week,” Harman added.
“Basically, Farage can dominate the media agenda.”
She went on: “He’s kind of stepped forward, and he’s using this moment of the House not sitting in order to actually get his voice heard.
“It’s sensible for the opposition to take the opportunity of when the House is not sitting to kind of grab the mic and that is what Nigel Farage has done.”
But Baroness Harman said it “doesn’t seem to be what Kemi Badenoch’s doing”.
She explained that the embattled leader “doesn’t seem to be grabbing the mic like Nigel Farage has” during recess, and added that “there’s greater opportunity for the opposition”.
The UK will buy up to 7,000 long-range missiles, rockets and drones and build at least six weapons factories in a £6bn push to rearm at a time of growing threats.
The plan, announced by the government over the weekend, will form part of Sir Keir Starmer’s long-awaited Strategic Defence Review, which will be published on Monday.
However, it lacks key details, including when the first arms plant will be built, when the first missile will be made, or even what kind of missiles, drones and rockets will be purchased.
The government is yet to appoint a new senior leader to take on the job of “national armaments director”, who will oversee the whole effort.
Andy Start, the incumbent head of Defence Equipment and Support – the branch of defence charged with buying kit – is still doing the beefed-up role of national armaments director as a sluggish process to recruit someone externally rumbles on.
Image: Sir Keir Starmer and Volodymyr Zelenskyy at a presentation of Ukrainian military drones. Pic: Reuters
Revealing some of its content ahead of time, the Ministry of Defence said the defence review will recommend an “always on” production capacity for munitions, drawing on lessons learned from Ukraine, which has demonstrated the vital importance of large production lines.
It will also call for an increase in stockpiles of munitions – something that is vitally needed for the army, Royal Navy and Royal Air Force to be able to keep fighting beyond a few days.
Some £1.5bn will be invested in the new factories, the government said. It said this additional funding will lift total expenditure on munitions to £6bn this parliament.
“The hard-fought lessons from [Vladimir] Putin’s illegal invasion of Ukraine show a military is only as strong as the industry that stands behind them,” John Healey, the defence secretary, said in a statement released on Saturday night.
“We are strengthening the UK’s industrial base to better deter our adversaries and make the UK secure at home and strong abroad.”
Image: Army Commandos load a 105mm Howitzer in Norway. Pic: Ministry of Defence/PA
The UK used to have a far more resilient defence industry during the Cold War, with the capacity to manufacture missiles and other weapons and ammunition at speed and at scale.
However, much of that depth, which costs money to sustain, was lost following the collapse of the Soviet Union in 1991, when successive governments switched funding priorities away from defence and into areas such as health, welfare and economic growth.
Even after Russia’s full-scale invasion of Ukraine in 2022 and a huge increase in demand from Kyiv for munitions from its allies, production lines at UK factories were slow to expand.
Image: A reaper drone in the Middle East. Pic: Ministry of Defence
Sky News visited a plant run by the defence company Thales in Belfast last year that makes N-LAW anti-tank missiles used in Ukraine. Its staff at the time only worked weekday shifts between 7am and 4pm.
Under this new initiative, the government said the UK will build at least six new “munitions and energetics” factories.
Energetic materials include explosives, propellants and pyrotechnics, which are required in the manufacturing of weapons.
There were no details, however, on whether these will be national factories or built in partnership with defence companies, or a timeline for this to happen.
There was also no information on where they would be located or what kind of weapons they would make.
Image: King Charles visits HMS Prince of Wales. Pic: PO Phot Rory Arnold/Ministry of Defence/PA
In addition, it was announced that the UK will buy “up to 7,000 UK-built long-range weapons for the UK Armed Forces”, though again without specifying what.
It is understood these weapons will include a mix of missiles, rockets and drones.
Sources within the defence industry criticised the lack of detail, which is so often the case with announcements by the Ministry of Defence.
The sources said small and medium-sized companies in particular are struggling to survive as they await clarity from the Ministry of Defence over a range of different contracts.
One source described a sense of “paralysis”.
The prime minister launched the defence review last July, almost a year ago. But there had been a sense of drift within the Ministry of Defence beforehand, in the run-up to last year’s general election.
The source said: “While the government’s intentions are laudable, the lack of detail in this announcement is indicative of how we treat defence in this country.
“Headline figures, unmatched by clear intent and delivery timelines which ultimately leave industry no closer to knowing what, or when, the MOD want their bombs and bullets.
“After nearly 18 months of decision and spending paralysis, what we need now is a clear demand signal from the Ministry of Defence that allows industry to start scaling production, not grand gestures with nothing to back it up.”
As well as rearming the nation, the government said the investment in new factories and weapons would create around 1,800 jobs across the UK.
Prison officers should be armed with lethal weapons to crack down on Islamist terrorists in jail, the shadow justice secretary has said.
Highly trained teams should also be equipped with tasers, stun grenades and baton rounds to tackle dangerous criminals in high-security jails, Robert Jenrick said.
The plan is taken from a series of recommendations by counter-extremism expert and former prison governor Ian Acheson.
It also follows several attacks on prison officers in jails.
In April this year, the Manchester Arena bomb plotter, Hashem Abedi, allegedly assaulted prison staff by throwing hot oil on them and then launching a stabbing attack, injuring three officers.
At Belmarsh prison, Southport killer Axel Rudakubana has been accused of throwing boiling water over an officer through the hatch in his cell door earlier this month.
Image: File pic: PA
Mr Jenrick said: “Islamist gangs and violent prisoners in our jails are out of control.
It’s a national security emergency, but the government is dithering. If they don’t act soon, there is a very real risk that a prison officer is kidnapped or murdered in the line of duty, or that a terrorist attack is directed from inside prison.”
He said he commissioned Mr Acheson to conduct a rapid review into measures the government could adopt.
The measures include removing all radical Islamist imams working in prisons, immediately rolling out high-collar stab vests to frontline officers, and mandating the quarterly release of data on religious conversions in prison and faith-based incidents.
It also recommended legislating to overturn the De Silva ruling to strip back judicial interference in operational decisions by governors to isolate extremists.
Mr Jenrick added: “We have to stop pussy-footing around Islamist extremists and violent offenders in jails.
“That means arming specialist prison officer teams with tasers and stun grenades, as well as giving them access to lethal weapons in exceptional circumstances.
“If prison governors can’t easily keep terrorist influencers and radicalising inmates apart from the mainstream prisoners they target, then we don’t control our prisons – they do. We must take back control and restore order by giving officers the powers and protection they need.”
Mr Acheson said: “Too often what goes wrong behind the walls of our high security jails passes unnoticed, as does the bravery of the men and women in uniform who deal every day with terrorists and other highly dangerous offenders.
“Robert Jenrick is right – the threat to officer safety is now intolerable and must be met decisively by the government.
“The balance inside too many of our prisons has shifted away from control by the state to mere containment and the price is soaring levels of staff assaults and wrecked rehabilitation. Broken officers can’t help fix broken people – or protect the public from violent extremism.”
A Ministry of Justice source said: “The government considers the introduction of lethal weapons into prisons would put prison officers at greater risk.”
They added: “The last government added just 500 cells to our prison estate, and left our jails in total crisis. In 14 years, they closed 1,600 cells in the high-security estate, staff assaults soared, and experienced officers left in droves. Now the arsonists are pretending to be firefighters.
“This government is cleaning up the mess the last government left behind. We are building new prisons, with 2,400 new cells opened since we took office. And we take a zero-tolerance approach to violence and extremism inside.”