Our correspondent Andreas Frank writes:  Prominent bitcoin entrepreneur Charlie Shrem has been indicted by a federal grand jury in New York on charges of funneling cash to the illicit online marketplace Silk Road.

Shrem, known as one of the digital currency’s most visible promoters, is accused of conspiring with a Florida man, Robert Faiella, to sell more than $1 million in bitcoins to the users of Silk Road despite knowing that it would be spent on illegal uses like drug trafficking

The indictment came after plea bargaining talks with federal prosecutors in Manhattan ended. Shrem, the former vice chairman of the Bitcoin Foundation, and Robert Faiella, who the U.S. said operated an underground Bitcoin exchange called “BTCKing,” are accused of engaging in a scheme to sell Bitcoins to users of Silk Road for illegal purchases.

Shrem, who was also the chief executive officer of a Bitcoin exchange company called BitInstant, and Faiella were first arrested in January and have been free on bond. They’re charged with two counts of operating an unlicensed money transmitting business, money laundering conspiracy and willfully failing to file suspicious activity reports with banking authorities, according to the indictment.

The case is the latest to be brought by Manhattan U.S. Attorney Preet Bharara’s office stemming from a probe of Silk Road, a sprawling and anonymous black market bazaar. Ross William Ulbricht was charged in October with running Silk Road under the alias “Dread Pirate Roberts,” and in December, Bharara charged three more former Silk Road employees with helping run the website. All have pleaded not guilty.

Shrem and Faiella face as long as 20 years in prison if convicted of the most serious charge of conspiracy.