The nascent Bitcoin digital currency is gaining acceptance rapidly with several large enterprises accepting purchases using this currency. The Sacramento Kings basketball team, overstock.com, and several casinos in Las Vegas are among these companies embracing its use.

However, unlike traditional currency subject to government and financial regulations, the cryptocurrency is untraceable and hence bound to be used in money laundering, fraudulent activities, and scams especially by Bitcoin miners and exchange markets.  Although fraud cases are common, most have been intercepted, fortunately, and the perpetrators brought to justice.

BitCoin Found Guilty of Fraud and Money Laundering

Recently, taxpayers and law enforcement agencies celebrated a win against Bitcoin fraud when a New York City federal jury found 52-year-old Trevon Gross, a popular Hope Cathedral pastor in Jackson, guilty of allowing Bitcoin fraudsters to launder dirty money in exchange for massive bribes and other kickbacks.

The pastor was the then chairman of the now-disbanded Help Other People Excel Federal Credit Union and was used by Coin.mx a Bitcoin exchange service ran by Anthony R.Murgio and Yuri Lebedev for money laundering. The two were also found guilty of various charges including making corrupt payments.

Unfortunately, unlike the coin.Mx case, most Bitcoin scammers slip through the cracks and continue their fraudulent activities because law enforcement and regulatory agencies yet to establish clear guidelines, regarding how to detect, charge, and regulate fraudulent activities associated with the cryptocurrency.

bitcoin ponzi scheme

Why are there so many unchecked Bitcoin scams? The currency lacks transparency and is hence easily abused by criminals and anyone with an intention to carry out illegal activities discreetly. This has contributed to a high prevalence of crime within the Bitcoin community.

However, contrary to popular belief, transactions using the digital currency can be traced. Tools to connect the transactions made and trace the Bitcoin economic activity make it possible to follow the fraudsters’ trail unlike when the digital currency’s early days before the development of such tools.

But if the rise in tracking tools has made it easier to nab criminals and scammers, why is Bitcoin still at the center of the laundering schemes? According to a study by Southern Methodist University, in the high-yield investment scams, con wallet services, scam exchanges and mining investment scams, the Bitcoin scammers are smart enough to gain their victims’ trust, and once they are entrusted with the funds, they use it to engage in fraudulent activities.

Most of the fraud connected to Bitcoin is due to the following factors:

  •  The confusion surrounding the currency where a section of would-be criminals held on to the wrong belief that the currency was not only unrecognized by the government but also that it was not possible to find or arrest them if they made their transactions using Bitcoin.
  • Marginalization and lack of effective regulation by traditional financial institutions have made the currency attractive to criminals and scammers. So fraudster schemes are common.
  • The Bitcoin community has a history of anonymous transactions, and this no-questions-asked attitude has attracted scammers in the past.