On Thursday two prominent Bitcoin supporters, Robert Faiella and Charles Shrem, pleaded guilty to federal charges in a FederalDistrict Court in Manhattan. Faiella, 54, was also known as BTCKing and admitted to operating an unlicensed money transmitting business on Silk Road. Shrem, 24, was formerly the CEO of BitInstant and is one of the founding members of the Bitcoin Foundation. He pleaded guilty to aiding and abetting the operation of an unlicensed money transmitting business.

A district court press release says that both men were accused on the basis that they, knowingly transmitted money intended to facilitate criminal activityspecifically, drug trafficking on 'Silk Road,' a black-market website designed to enable its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. Federal investigators shut down the Silk Road last October and arrested the alleged founder, Ross Ulbricht, who went by the name Dread Pirate Roberts.

Shrem and Faiella were both arrested in January. Prosecutors said the two sold over $1 million in Bitcoins to users of the Silk Road. According to court documents, Faiella sold bitcoins to Silk Road users directly and relied on Schrem's company to set up anonymous exchange accounts for his customers.

I knew that what I was doing was wrong. I am pleading guilty because I am guilty,"Shrem told the court on Thursday, according to The New York Times. In a prepared statement, the prominent Bitcoin advocate said that from January 2012 to October 2012 he helped Faiella exchange dollars into bitcoins through BitInstant. He said Mr. Faiella would in turn sell Bitcoin to people who wanted to buy drugs on Silk Road, the NYT reported.

In January, prosecutors alleged that BitInstant prohibited deposits from customers that exceeded $1,000 per day to circumvent disclosure requirements by US law. But substantial transactions and patterns of transactions that might stem from illegal activity are also required to be disclosed under anti-money laundering laws, and Schrem did not file the necessary reports.

The Federal district court judge set a sentencing datefor January 20, and both men face up to five years in prison. Schrem has been under house arrest at his parents' home in Brooklyn, New York. He has also been working for Payza, an online platform for sending and receiving the coins, TheNew York Times reports.

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Bitcoin exchangers Charles Shrem, Robert Faiella plead guilty to federal charges