For those who are unfamiliar, bitcoin is virtual currency also referred to as "peer to peer" or "open source" currency. Bitcoin was created around 2009, but its exact origins are unknown. Bitcoin is desirable for many because it eliminates the intermediary – namely banks – for transactions. Bitcoin transactions are anonymous and are not subject to transaction fees.
Bitcoin's user base has expanded drastically since its inception five years ago – some of the nation's top vendors now accept bitcoin payment. Accompanying its rise in popularity is an increase in opportunities to defraud. The feds, the U.S. Securities and Exchange Commission (SEC), and the IRS have all recently uncovered cases of bitcoin fraud.
Recently, an unnamed bitcoin entrepreneur was fined $40 million on Ponzi scheme allegations. According to reports, the entrepreneur had been using money from current investors to pay back older investors. This case and many others like it are paramount in the bitcoin debate. By accusing bitcoin executives of fraud and money laundering, federal agencies are acknowledging that bitcoin is in fact money.
Currently, bitcoin is largely unregulated, but if these types of allegations continue, there is a high likelihood this could change.