It's a blow to the Bitcoin community — Shrem is a vice chairman at the Bitcoin Foundation, and was listed as a speaker at a major Bitcoin conference in Miami this weekend.

But it looks like the bust was directly related to the site's involvement in former illicit goods marketplace Silk Road, which the Feds really didn't like. Bitcoin prices aren't really moving much on the news. The Feds say BitInstant has been offline since July. 

According to the criminal complaint, Shrem helped Robert Faiella, a 52-year-old Florida resident, process Bitcoin sales from customers on Silk Road who wanted to buy drugs. The scheme was allegedly a huge part of BitInstant's revenue stream.

"Faiella obtained Bitcoins with the company's assistance, and then sold them to Silk Road users at a mark-up," it says.