UPDATED 14:31 EDT / JANUARY 29 2014


Bitcoin Weekly, January 29, 2014: TigerDirect on board, CEO of BitInstant arrested, Antonopoulos joins Blockchain.info

As far as weeks go, this one held a great deal of drama and interest for the Bitcoin community. TigerDirect.com became the first major retailer to use BitPay to process bitcoins (in the wake of Overstock.com going with Coinbase); Blockchain.info nabbed Andreas Antonopoulos as Cheif Security Officer, increasing their stake and presence in the Bitcoin market; New York City held hearings on virtual currency and heard numerous speakers on the ins-and-outs and hows-and-whys of cryptocurrencies and of course bitcoins; and CEO of BitInstant, Charlie Shrem, was arrested on charges related to money laundering and facilitating drug trade alongside a user from the now-defunct Silk Road.

The announcement of Shrem’s arrest led to a notable downturn in the market value of bitcoins, causing the value to drop on open markets almost 10% – noticeable due to an increase in trading volume throughout that day. However, the value is once again recovering from that apparent “shock,” placing it more-or-less back into a familiar band around $820 per BTC.

BitInstant CEO Charlie Shrem arrested on charges of money laundering

The Bitcoin community experienced a bit of a shake-up recently – mere days before NYC virtual currency hearings – with the dual arrests of Bitinstant CEO Charlie Shrem and Robert Faiella, aka BTCKing. The charges against Shrem include allegations of money laundering and knowingly funneling money through the exchange to Faiella’s illegal drug trafficking activities on the Silk Road.

“There is a chance that this is unfairly targeting BitInstant, which was founded in the absence of a regulatory environment,” says Mark ‘Rizzn’ Hopkins, founding editor of SiliconANGLE. “BitInstant was the recipient of $1.5 M in venture funding from the Winkelvoss Bitcoin-based VC fund, so the implication is one of the following: the Winkelvoss Fund isn’t doing very good due diligence, or BitInstant is being unfairly targeted by the feds.”

Hopkins notes that he became an active user of BitInstant when MTGox became unstable for US users who found themselves unable to withdraw funds from the exchange. He adds that he was part of a large migration of legitimate customers who found BitInstant a safe harbor in the ensuing storm.

Accusations of being part of criminal enterprises against banking institutions has become part of modern media coverage, and while trials have occurred, punishments are thin.

“What BitInstant is being accused of, HSBC, Bank of America, and other major well known banks have settled with the feds on with minor slaps on the wrist,” Hopkins says. “If this case settles out, you’ll know Bitcoin has arrived.”

Manhattan U.S. Attorney Preet Bharara has been careful to distance the case against Shrem and Faiella from the use of bitcoin by focusing on the alleged criminal activity:

“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 old-fashioned 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.”

In short, from the point of view of the U.S. attorney the message is becoming clear: there’s nothing wrong with trading and exchanging bitcoins; just don’t facilitate illegal activity such as money laundering or drug trade. This reflects the same attitude that rose from the shutdown of Silk Road, which fell not because of the use of bitcoins, but because of the illegal activities taking place.

In the fallout from his arrest, Shrem has resigned as Vice Chairman of the Bitcoin Foundation effective immediately, in what was cited as a mutual decision.

Andreas Antonopoulos joins Blockchain.info as Chief Security Officer

Blockchain.info has been an imminent Bitcoin web-wallet and a source for charts, information on Bitcoin block chain transactions, and statistics—and apparently has made quite the pretty penny from being a forerunner in the Bitcoin market. Now, Blockchain.info is also the recipient of a new team member in welcoming Andreas Antonopoulos on board as Chief Security Officer.

“[W]e are thrilled to announce a new most valuable asset to the Blockchain team. Andreas Antonopoulos, an amazing Bitcoin advocate and a most respected thought-leader of Bitcoin has been brought on to serve as our Chief Security Officer,” wrote a Blockchain.info spokesperson on the company’s blog.

Antonopoulos serves as a host on the Let’s Talk Bitcoin podcast and is the mind behind several Bitcoin-related businesses.

TigerDirect.com pounces on the Bitcoin bandwagon

To much fanfare and a surge of buyers who wanted to be the first through the virtual doors to buy something with their hard earned BTC, TigerDirect.com began accepting bitcoin as payment on Thursday, January 23rd. Soon after, the online electronics retailer also released statistics announcing earnings of over $250,000 USD with its first 17 hours of accepting the digital currency. A subsequent report by Bitcoin Board revealed that over $500,000 USD worth of products were bought with bitcoins in the first three days of BTC sales. This was also retweeted by @TigerDirect via another blog.

With this move, TigerDirect becomes the first big retailer to accept BitPay as their BTC processor. Overstock.com went with the BitPay’s primary rival Coinbase earlier this month, becoming the first retailer to accept Bitcoin.

Quote of the Week

This week we reached out to Eric Adamowsky, co-founder of CreditCardInsider.com, about his thoughts on how the times are changing with Overstock.com and TigerDirect being the first to make a splash with bitcoin acceptance.

“I believe that the widespread adoption of bitcoin will occur when the leading merchants worldwide begin to accept the digital currency,” Adamowsky says. “As new services emerge into the bitcoin landscape, the ability for consumers to pay with bitcoin will become much easier as these companies work to reduce the friction when converting fiat currency into bitcoin and other crypto currencies.”

As a treat for those interested in the impact of Bitcoin on the technology sector, John Furrier asked Gary Orenstein, CMO of Fusion-io, to discuss Bitcoin during this week’s theCUBE broadcast from Open Compute Summit V. Orenstein gave a fairly positive quote (jump to 33:53 in the clip below).

Orenstein stated, “any time you can take the friction out of commerce and payments, it generally leads to more–and hopefully positive–activity.”

A message from John Furrier, co-founder of SiliconANGLE:

Your vote of support is important to us and it helps us keep the content FREE.

One click below supports our mission to provide free, deep, and relevant content.  

Join our community on YouTube

Join the community that includes more than 15,000 #CubeAlumni experts, including Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger, and many more luminaries and experts.

“TheCUBE is an important partner to the industry. You guys really are a part of our events and we really appreciate you coming and I know people appreciate the content you create as well” – Andy Jassy