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Winklevoss Twins Sue Former CEO of BitInstant Over Alleged Bitcoin Theft

By NexChange
FinTech, Blockchain

Tyler and Cameron Winklevoss have sued Charles Shrem, the former chief executive of BitInstant, claiming that he used part of their 2012 investment to enrich himself, as the New York Times reports.

The Winklevoss twins made a $750,000 investment in BitInstant in 2012 – the company was “one of the first prominent Bitcoin businesses in the United States,” the Times notes – and are now claiming that Shrem used part of that investment to buy 5,000 Bitcoins for himself. The coins, which were worth $61,000 at the time, would now be worth $32 million today.

Shrem went to federal prison in 2015 after pleading guilty to helping people use Bitcoin to buy drugs from the now-shuttered online dark web marketplace Silk Road. He got out of prison about a year later.

Shrem “has said in recent interviews that he went to prison with almost no money,” according to the Times, but somehow owns “two Maseratis, two powerboats — one of them 32 feet long — and a $2 million house in Florida, along with smaller pieces of real estate.”

“Either Shrem has been incredibly lucky and successful since leaving prison, or — more likely — he ‘acquired’ his six properties, two Maseratis, two powerboats and other holdings with the appreciated value of the 5,000 Bitcoin he stole from” the Winklevoss twins in 2012, the lawsuit says.

The judge who oversaw Mr. Shrem’s earlier trial has already agreed to freeze some of Mr. Shrem’s financial assets, according to court documents.

The lawsuit could blossom into an ever bigger problem for Mr. Shrem because an affidavit filed in court suggests that Mr. Shrem has also not paid the government $950,000 in restitution that he agreed to as part of his 2014 guilty plea.

The Winklevoss twins said they gave Shrem and BitInstant $750,000 “to buy Bitcoin from other deep-pocketed investors,” as the twins began accruing what has become a large crypto asset base.

Per the Times:

A few months into this partnership, the twins said, they realized that Mr. Shrem had not given them all the Bitcoin they were due. The brothers gave Mr. Shrem $250,000 in September 2012, but the lawsuit says that a month later, he delivered only around $189,000 worth of Bitcoin at the going price, which was around $12.50.

The 5,000 or so missing Bitcoins became a point of tension between the twins and Mr. Shrem. They asked him numerous times for an accounting of the Bitcoins he had purchased and eventually brought in an accountant who documented the missing funds, according to court documents.

The lawsuit includes an email that Cameron Winklevoss sent to Shrem in 2013 in which he stated that he’d “been patient, and at this point it’s getting a bit absurd.” BitInstant crumbled that same year.

Brian Klein, who is Shrem’s lawyer, has denied the Winklevoss twins’ allegations.

“The lawsuit erroneously alleges that about six years ago Charlie essentially misappropriated thousands of Bitcoins,” Klein said in a statement. “Nothing could be further from the truth. Charlie plans to vigorously defend himself and quickly clear his name.”

Photo: Noam Galai/Getty Images for TechCrunch

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