Who is Charlie Shrem? He’s the man who bought 500 BTC at $3 as a college freshman at Brooklyn University in 2011. And right after, he hoarded thousands of it to establish the now-defunct company BitInstant, all while still in college.
Although Charlie is currently an expert advisor on cryptocurrencies, his journey in the crypto niche is far from smooth. He went from being a cofounder to a ‘crypto prisoner’ and then a successful entrepreneur.
In this article, we’ll explore Charlie Shrem’s unusual journey, from his early days as a crypto enthusiast to his legal troubles and subsequent entrepreneurial success.
Meet Charlie Shrem, the Brooklyn Kid Who Rode the Bitcoin Wave
Charlie Shrem was born in 1989 in Brooklyn, New York, to an Orthodox Jewish family. As a young boy at Yeshiva Private High School, he often felt like an “outcast,” struggling to fit in. This sense of alienation led him to find solace in the digital space, where he discovered a community of like-minded individuals in online chat rooms and forums.
Interestingly, Shrem had shown an entrepreneurial spirit from a very young age. In high school, he launched Epiphany Design and Production, a company that repaired printers and computers. Later, while attending Brooklyn College, he founded Daily Checkout, a daily deal website for refurbished goods. This venture caught the attention of BlueSwitch, which acquired the company in 2012.
While browsing an internet forum, a friend introduced him to the concept of Bitcoin. At that time, Bitcoin was still in its infancy–there wasn’t even an official website, just Satoshi Nakamoto’s revolutionary white paper that outlined the digital currency’s potential.
Shrem began investing in Bitcoin during his senior year at the City University of New York (CUNY) in 2011. He bought his first 500 BTC at $3 per share instead of mining them. After a while, the price of Bitcoin rose to $20, and then he realized the potential of this particular digital currency and hoarded thousands of it.
Unfortunately, his initial experience taught him a harsh lesson about the uncertainty in the crypto space. The Bitcoin service he was using crashed, taking his investments with it.
Shrem’s experience with the slow and complicated process of buying and selling Bitcoin led him to team up with Gwen Nelson, an online acquaintance who shared his concerns. Together, they founded BitInstant in September 2011, a user-friendly platform that streamlined Bitcoin transactions.
This platform allowed people to buy small amounts of Bitcoin at physical locations like CVS, Walmart, and Walgreens. They charged a fee for users to purchase and make transactions with bitcoins at over 700,000 locations, offering a temporary solution that sped up the process.
BitInstant’s success allowed many people across the US to access Bitcoin conveniently. What started as a side project quickly gained momentum that needed funding.
In response to the growth, Shrem took his first $10,000 loan from his mother to lay the groundwork for BitInstant’s growth. Later on, the company’s potential attracted significant investment, including $125,000 from angel investor Roger Ver and a whopping $1.5 million from a group led by Winklevoss Capital Management.
Fast forward to 2013, BitInstant was processing about 30% of all Bitcoin transactions. The company operated until July 2013, when they intentionally shut down. Overall, one could say BitInstant played a crucial role in making Bitcoin more accessible to the average user in its early days.
Moreover, Shrem’s idea of Bitcoin isn’t just about business. He saw himself as a “bitcoin purist” who believed blockchain technology could empower individuals to protect their money without relying on traditional financial institutions.
This conviction led him to create the Bitcoin Foundation in 2012, an organization dedicated to standardizing and promoting Bitcoin.
However, his journey took an unexpected turn when he was arrested and sentenced to two years in prison.
Charlie Shrem’s “Crypto Prisoner” Saga
Charlie Shrem’s rise in the cryptocurrency space came to a sudden halt on January 26, 2014. A joint task force of the FBI, IRS, DEA, and other officials intercepted and arrested him at JFK Airport as he returned from an e-commerce convention.
His prosecutors claimed he and Robert Faiella had deliberately helped to launder $1 million in bitcoins, which was linked to illegal purchases on the Silk Road, a notorious online marketplace. Shrem was also accused of BitInstant operating without a license and failing to report suspicious banking activity.
After posting $1 million bail, Shrem found himself under house arrest at his parents’ home in Brooklyn. This shocking turn of events stunned the crypto community, where Shrem had been seen as a pioneer.
On April 10, 2014, Shrem was formally indicted. The charges suggested he had crossed a line in his enthusiasm for cryptocurrency, allegedly enabling illegal activities through his business.
Facing these serious accusations, Shrem made a strategic move. On September 4, 2014, he pleaded guilty to a lesser charge of aiding unlicensed money transmission, reducing his potential sentence.
Sadly, on December 19, 2014, the court sentenced Shrem to two years in prison and ordered him to forfeit $950,000. This verdict was a dramatic reversal for the once-celebrated Bitcoin entrepreneur.
Shrem began his prison term on March 30, 2015, at Lewisburg Federal Prison Camp in Pennsylvania. For someone who had been at the forefront of the digital revolution, life behind bars was a stark change.
Shrem’s time as a “crypto prisoner” ended around June 2016 when he was released. However, his legal troubles weren’t over.
In September 2018, the Winklevoss twins, early investors in his company BitInstant, sued him for $32 million. They claimed Shrem had stolen over 5,000 bitcoins from them in 2012, which led to a partial freeze of his assets.
This new legal fight brought fresh attention to Shrem’s finances. However, in a surprising turn, a judge overturned the order freezing Shrem’s assets in 2019, and the Winklevoss twins’ lawyer was told to pay Shrem’s legal fees.
After reaching a confidential settlement, both parties later agreed to end the legal fight.
From a Prisoner to a Successful Entrepreneur
After his release from prison in June 2016, Charlie Shrem quickly rejoined the crypto community.
In November 2016, Shrem launched his first Venture after leaving Prison, Intellisys Capital, where he became the chief technology officer. The project provided investors the opportunity to buy shares in profitable companies by buying a new token on the Ethereum blockchain. But it was dissolved in March 2017.
Shrem joined Jaxx, a multi-platform cryptocurrency wallet, in May 2017 as director of business and community development and later became the chief operating officer. Shrem also worked with the cryptocurrency Dash, where he proposed a debit card that could be loaded with Dash coins and converted to local currency for everyday purchases.
One of Shrem’s most significant post-prison ventures is CryptoIQ, an advisory business he founded to bring cryptocurrencies into the mainstream.
Shrem’s expertise and story have made him a popular figure in crypto-related media. He has appeared in documentaries like “The Rise and Rise of Bitcoin” and “Banking on Bitcoin” and on NPR’s “Planet Money” podcast.
Several books have also covered Shrem’s role in the early days of Bitcoin, including:
- “Digital Gold” by Nathaniel Popper
- “How Money Got Free” by Brian Patrick Eha
- “Bitcoin Billionaires” by Ben Mezrich, which covers Shrem’s interactions with the Winklevoss twins
As of June 2024, Charlie Shrem was president of Amalgamated Suncoast Portfolio, an economic analyst at Investor Place, a general partner at Druid Ventures, and a podcaster.
With these ventures and media appearances, Charlie Shrem has transformed from a “crypto prisoner” to a respected entrepreneur and thought leader in cryptocurrency. Shem’s unusual journey shows the potential for redemption and reinvention, even in digital finance.
Lessons Learned and Industry Impact
Charlie Shrem went from being a crypto pioneer to a convicted felon and then became a successful entrepreneur. His experience offers valuable lessons for the cryptocurrency industry.
Here are some key lessons from Shrem’s experience:
| Lesson | Charlie Shrem’s Example |
| 1. Regulatory compliance is very important | Shrem’s legal troubles came from operating in a largely unregulated environment, especially in the early days. Crypto traders must be aware of ethics and laws in the crypto space and trade on licensed platforms like Zypto. |
| 2. The crypto space demands resilience and reinvention | Despite setbacks like imprisonment and asset freezes, Shrem re-established himself in the crypto world. His work with projects like Jaxx shows that he’s still very much committed to the community. |
| 3. Crypto education is really important | After leaving prison, Shrem has been giving talks to share what he’s learned and to warn new crypto fans and business owners. |
| 4. The cryptocurrency industry has a very volatile nature | Shrem’s story shows how the crypto industry can change a lot and be unpredictable. At the same time, it can make a lot of successful people and entrepreneurs. |
| 5. The evolving role of cryptocurrency in society | Shrem’s early vision of Bitcoin as a tool for financial empowerment hasn’t changed. In fact, it has been proven true. Blockchain technology can now be used for different purposes, and more people and companies worldwide are adopting this technology. |
In essence, Charlie Shrem’s story shows the potential for innovation, the risks of operating in new legal territories, and the possibility of redemption and reinvention in the crypto industry.
Conclusion
From Charlie Shrem’s rise with BitInstant to his fall and subsequent imprisonment and finally to his reinvention as a respected entrepreneur and advisor, his story portrays cryptocurrency’s turbulent history.
As the cryptocurrency industry continues to evolve, stories like Shrem’s serve as both cautionary tales and inspirational examples of perseverance. They remind us of the potential risks and rewards in this evolving field and the importance of learning from past mistakes as we move forward.
The most essential lesson for newbies and even established crypto traders is choosing and trading with a trusted licensed platform. And that’s where Zypto comes in.
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One more thing. What other lesson do you take from Charlie Shrem’s story? Please share your thoughts in the comments below.
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