Justice Watch: Bitcoin, What Is It And Why It Stirs Worries Of Criminal Activity

Kozyak, Tropin & Throckmorton partner Harley Tropin said there is little doubt Bitcoin in its current incarnation can be used to defraud and to launder ill-gotten gains.
“While they are a legitimate business opportunity, the opportunity to cheat people is really there,” the Coral Gables attorney said. “People are interested in these new business opportunities, but the built-in protection that you have in the developed market isn’t there.”
The virtual currency exists within the matrix of the Internet. Users have virtual wallets and execute transactions through software on a personal computer or mobile device.
New Bitcoins can be obtained by computers performing complex algorithms to execute transactions in the high-tech financial world.
The value of one Bitcoin skyrocketed from $20 in early 2013 and has topped $1,000. These days it’s hovering around $600. Bitcoin use is booming in places like Hong Kong.
“Bitcoin is the shiny new ball that investors will look at in 2014. I don’t see Bitcoin as a bad thing,” Tropin said. “Just because it’s new and it’s not fully regulated you are seeing opportunities for abuse and money laundering until regulators get their arms fully around it.”
Eric Bustillo, regional director of the Securities and Exchange Commission in Miami, said regulators are working on it. He points out a civil complaint in July against Trenton T. Shavers in Texas for defrauding investors in his company, Bitcoin Savings & Trust.
The SEC said Shavers duped investors into handing over 700,000 Bitcoins valued at $4.5 million on the promise that his company would trade the currency online and provide weekly returns of 7 percent. It was really a pyramid scheme, the agency charged.
Bustillo noted the SEC has put out an investor alert on Bitcoin.
“It’s something new, and there’s not a lot of transparency,” he said. “Obviously, it’s digital, and it’s worldwide. I don’t think there is much of a regulatory scheme at this point.”

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