Charlie Shrem went from running a small online business to becoming a Bitcoin (BTC) millionaire and appearing on the cover of Forbes magazine. Then he went to jail.
inside The latest episode of Cointelegraph crypto storyIn “Shrem,” Shrem tells the story of how he founded BitInstant, grew it into a multimillion-dollar Bitcoin empire, and then was arrested for his role in it.
Shrem’s first business was an e-commerce site that charged just $5 per item for shipping. The idea was his cousin’s, but Schrem used his coding skills to create the actual website. The company sells lamps, toothbrushes, razors and various other items.
In his free time, Schrem often surfs message boards. There he discovered Bitcoin. At the time, the only way to buy Bitcoin was to wire large amounts of money to Mt. Gox, and it took a week for deposits to clear within the banking system. Customers who want to buy in small quantities or want to buy immediately have no way to do so.
Schrem met a man named “Gareth” on one of the forums, and the two started a business that allowed people to buy and sell Bitcoin instantly. Their company is called BitInstant. For instant purchases, the company deposits money into Mt. Gox and uses it to buy Bitcoin. They then sell these Bitcoins in small amounts to different customers.
But Schrem and his partners ran into a problem. As trading volume grew, they needed more and more cash to deposit with Mt. Gox, and they quickly ran out of funds, as Shrem explains:
“It always needs more money because the size of our transactions keeps growing. So just like an ATM machine needs money to stay in the machine all day, we also need money to stay on the exchange for a week because it takes a week to top up again. time. It’s a cycle, so we always need seven to eight times the volume.”
The two entrepreneurs met with Roger Ver, who helped them inject $100,000 to continue expanding their business. Ver also suggested that the team hire Erik Voorhees. Later, Voorhees and Schrem met David Azar at a tech conference, and he invested more. Finally, during their honeymoon, Azar met Cameron Winklevoss and Tyler Winklevoss on the beach and convinced them to invest in the company, which provided the company with enough cash to overcome Difficulties in scaling up.
related: Erik Voorhees slams Bitcoin maxis for ‘disgusting’ behavior
BitInstant grew so quickly that it eventually accounted for 30% of the transaction volume on the Bitcoin blockchain. Meanwhile, Shrem struggled in his relationships with his family and the Jewish community to which he belonged. Shrem began to feel that his religious community was suffocating, especially after he fell in love with a non-Jew. This frustration eventually came to a head, and Shrem decided to leave the Jewish community.
Later, when Schrem tried to get off the plane in New York, he was arrested and charged with money laundering for his role in BitInstant. Authorities allege that some BitInstant customers used Bitcoin purchased from the company for illegal purposes, including conducting criminal transactions on the Silk Road darknet market.
After being released on bail, Schrem was placed under house arrest and forced to live with his strict Jewish parents, who viewed his arrest as God’s punishment for leaving the community. “They thought I deserved everything,” Schrem said. “They were happy to see me in jail because they felt I had hurt them.”
That’s all for Part 1 of Charlie Shrem’s Crypto Story. There’s more to come in Part 2.
Follow the full story: The untold story of Charlie Schrem.
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