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Bitcoins May Be Letting Fraud Run Rampant

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One of the biggest attractions of bitcoins is their unregulated nature, especially when it comes to criminals. However, as more and more mainstream investors have become interested in the digital currency, fraud could become a bigger and bigger problem.

Twitter call to pump up bitcoins

CNBC‘s Nathaniel Popper reports on a scheme that has been circulating Twitter as a “penny stock-style pump-and-dump” plan. These scams urge people to bid up the prices of things and then sell them off. Regulators tend to have a pretty tight handle on these types of things happening in most markets. However, the bitcoin market is, for the most part, unregulated. This makes the value of bitcoins vulnerable to virtually anything shady people want to do to it.

The person who is pushing this pump-and-dump scheme for bitcoins is known simply by the Twitter handle Fontas. According to CNBC, he pushed his plan in a secure Internet chat room which he operated.

Regulations? What regulations?

Apparently he’s not too worried about regulators cracking down on him:

“For now, the lack of regulations allows everything to happen,” Twitter user Fontas wrote. His account has thousands of followers, but he has not revealed his identity. Fontas said that bitcoins and everyone who use them would see benefits when regulators step in to watch over the digital currency. He also said that he would put an end to his schemes when they do step in.

Today bitcoin prices have fallen off significantly, dipping below $900 on the Japanese exchange Mt. Gox and U.S.-based exchange Coinbase. Their value spent several days over $1,000.

Regulators consider bitcoins

On Thursday officials in China officially prohibited banks there from making transactions in bitcoins. The Bank of France also stepped in, issuing a warning about possible risks of using the digital currency. Bitcoins have also grabbed the attention of many big name investors.

Many people see bitcoins as a potential future online payment system, while others like them because there will only ever be a limited number of them in existence. Because of the computer program which created bitcoins, there will never be more than 21 million of them, and we won’t see all 21 million of the bitcoins for many more years. At this point the value of all the bitcoins which currently exist is over $12 billion.

But the more investors and regulators become interested in bitcoins, the more hackers are interested, particularly because the digital currency is nothing more than a string of code. Some hackers have been breaking in and stealing millions of dollars of bitcoins from unsuspecting investors. Others have been infecting computers with ransomeware and then demanding bitcoins in exchange for restoring encrypted files.

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