CEO of Bitcoin exchange arrested

The CEO of a bitcoin exchange has been arrested on charges of selling bitcoins to be used to buy and sell illegal drugs anonymously.
Charlie Shrem, the 24-year-old CEO of BitInstant, along with Robert M. Faiella, a 52-year-old bitcoin broker and user of Silk Road, were both arrested according to a federal criminal complaint from the Southern District of New York.
According to the complaint, both men are accused of participating in a scheme to sell more than $1 million in Bitcoins to users of "Silk Road," the underground website that allowed people to anonymously buy and sell illegal drugs.
Shrem would change cash to bitcoins for Faiella, who was running an underground bitcoin exchange under the name BTCKing on Silk Road's website, which was shut down about four months ago.
In addition to money laundering, Shrem is also charged with failing to file any suspicious activity regarding Faiella's illegal transactions, which the Department of Justice said is in violation of the Bank Secrecy Act.
It was also noted in the complaint that Shrem used Silk Road himself to purchase drugs, including marijuana brownies.
(Read more: CNBC Explains: How to mine bitcoin on a budget)
"The charges announced today depict law enforcement's commitment to identifying those who promote the sale of illegal drugs throughout the world. Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way," said James J. Hunt, the Drug Enforcement Administration acting special agent in charge of the case, in the compaint.
BitInstant's backers include Tyler and Cameron Winklevoss, who have a number of investments in bitcoin start-ups.

"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," the Winkelvoss twins said in a statement.

"Although BitInstant is not named in today's indictment of Charlie Shrem, we are obviously deeply concerned about his arrest," they said. "We were passive investors in BitInstant and will do everything we can to help law enforcement officials."

Source: Wikipedia

Charlie Shrem

Shrem is listed as a board member of the Bitcoin Foundation, which is an organization that works to standardize and promote the use of bitcoins.
BitInstant's website is currently down.
(Read more: New York state to mull bitcoin licensing proposal)
Shrem was arrested Sunday at John F. Kennedy International Airport in New York and Faiella was arrested Monday at his home in Cape Coral, Fla.
CNBC reached out to Shrem's lawyer for comment, but has not yet received a response. And the Manhattan U.S. attorney's office does not yet have the name of Faiella's attorney.

—By CNBC

Are fears of an Australian housing bubble overblown?

Rising property prices in Australia, deemed one of the most expensive property markets in the world, have reignited worries over a bubble, but local residents and strategists remain unconvinced.

Prices in Australia have more than tripled since 1997, as low interest rates, high incomes and growing Asian demand worked to propel prices higher. There was a brief period of respite between 2011 and mid-2013 when prices fell 4 percent, but in recent times they have picked up again, rising at their fastest pace in three years in 2013 at near 10 percent.
This week Sydney and Melbourne were branded the fourth and fifth most unaffordable cities to buy a house out of 360 metropolises profiled in the Demographia International Housing Affordability survey published.
(Read More: Hong Kong's housing market is 'least affordable': survey)
A two bedroom apartment in central Sydney, for example, can fetch AUS$1.25 million ($1.1 million) according to property website Domain.
Rebecca Lipscomb, a 32-year old nurse from Sydney, told CNBC many of her peers are being forced to rent because house prices in the more desirable suburbs of Sydney are beyond what they can afford.
"One or two generations ago the Aussie dream was to have a house, but that's changed now. People have to move to smaller apartments, or away from central Sydney, or even overseas," she said.
"You just don't get a lot for your money. Young people have to turn to their parents for help. Unless you are in a couple, and are both on good salaries, then it is very hard to buy."

(Read more: Where's the next property bubble building?)
According to Nick Maroutsos, founder and managing director at Kapstream Capital, the pace at which Sydney house prices have spiked has been unsettling. As of January 24, house prices in Sydney rose 13.08 percent over the past 12 months, according to the RP Data-Rismark house price report, while Melbourne saw a 10.82 percent rise and Perth, a 7.63 percent jump.

"Is it a bubble? Possibly, which is another reason why the Reserve Bank of Australia will be reluctant to cut interest rates," he said. "First time homeowners are being priced out of the market and prices continue to head north. It is quite unsettling in that after a brief plateau the appreciation continued, but demand is high and supply is low."

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Australian dollar rises following strong inflation data

CNBC's Matthew Taylor reports on the market reaction following Australia's stronger-than-expected fourth quarter inflation data.

But talk of a bubble in Australia's frothy property market has been around since 2001, and some analysts believe these concerns are cyclical and usually prove unfounded.

This week Fitch Ratings said it expects Australia's house prices to moderate over the next decade, helping cool some of the recent bubble talk. It said affordability will deteriorate in the near term, as house prices continue to rise more than income levels, but longer term it was not feasible for house price growth to excessively disconnect from incomes.

(Read More: Housing market could be facing another bubble: Shiller)
Evan Lucas, strategist at trading firm IG, said many commentators from Europe and the U.S. who have warned a bubble in Australia's housing are simply misinformed.

"If you look at the set-up of the country, 87 percent of the population live in major cities, so there will always be demand and not enough supply. It's different from other economies for that reason, and a lot of international commentators don't factor that in. That's why we have had a lot of calls for a bubble which haven't materialized," he added.

Another concern is that if interest rates rise from their current record low, borrowers could get squeezed and first time buyers could find it even more difficult to get on the property ladder, given that unemployment is expected to rise and many buyers are on low to medium incomes. There has also been some concern over negative gearing, when investors borrow to buy an asset, but the income generated doesn't cover the interest on the loan.

(Read more: 2014 a 'litmus test' for Australia economy: Goldman)

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The most unaffordable cities to buy property

According to the Demographia International Housing Affordability Survey, Hong Kong was ranked the most unaffordable city to buy property. CNBC's Julia Wood reports.

But Matthew Circosta, economist at Moody's Analytics, said he didn't perceive this to be a problem.

"Even if rates do rise, homeowners aren't going to feel much of a pinch as most are locked into fixed rate mortgages. It's not going to sap new demand. Prices might see a cooling, but they are not going to fall into a hole," he added.

Sam Aftasi, a 33-year-old account service manager, who owns two properties in Melbourne, told CNBC he also had a fixed rate mortgages so was not concerned about rising rates, and also thought bubble fears were overblown.

"I've read a lot about China and how they have all these investors speculating in the market, you don't have that situation here because people actually live in their homes and own them. We also have a large migration into Australia, so there is actually a shortage of homes, so when people say there is a bubble, there actually can't be a bubble because we don't have enough homes," he added.
(Read more: Why the Aussie dollar may spiral to 85 cents)

— By CNBC