The latest arrests, however, could rekindle some of those questions over the currency's ability to facilitate illegal activity. This week New York financial regulators are likely to mull these concerns during a public hearing on virtual currencies.
BitInstant has a bit of a celebrity pedigree — its investors include venture capitalists Cameron and Tyler Winklevoss, who engaged in legal battle with Mark Zuckerberg, claiming he stole their social networking idea, called ConnectU, to create Facebook. Their venture arm, Winklevoss Capital, previously made a $1.5 million investment in BitInstant.
In a statement Monday, the Winklevosses called themselves passive investors in BitInstant who "will do everything we can to help law enforcement officials."
"When we invested in BitInstant in the fall of 2012, its management made a commitment to us that they would abide by all applicable laws - including money laundering laws — and we expected nothing less," they said.
"We fully support any and all governmental efforts to ensure that money laundering requirements are enforced," they said, "and look forward to clearer regulation being implemented on the purchase and sale of bitcoins."
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