Bitcoin, the Internet currency beloved by computer scientists, libertarians, and criminals, is no longer invulnerable. As recently as 3 years ago, it seemed that anyone could buy or sell anything with Bitcoin and never be tracked, let alone busted if they broke the law. Its totally anonymous, was how one commenter put it in Bitcoin's forums in June 2013. The FBI does not have a prayer of a chance of finding out who is who.
The Federal Bureau of Investigation (FBI) and other law enforcement begged to differ. Ross Ulbricht, the 31-year-old American who created Silk Road, a Bitcoin market facilitating the sale of $1 billion in illegal drugs, was sentenced to life in prison in February 2015. In March, the assets of 28-year-old Czech national Tomá Jiříkovský were seized; hes suspected of laundering $40 million in stolen Bitcoins. Two more fell in September 2015: 33-year-old American Trendon Shavers pleaded guilty to running a $150 million Ponzi schemethe first Bitcoin securities fraud caseand 30-year-old Frenchman Mark Karpelès was arrested and charged with fraud and embezzlement of $390 million from the now shuttered Bitcoin currency exchange Mt. Gox.
The majority of Bitcoin users are law-abiding people motivated by privacy concerns or just curiosity. But Bitcoins anonymity is also a powerful tool for financing crime: The virtual money can keep shady transactions secret. The paradox of cryptocurrency is that its associated data create a forensic trail that can suddenly make your entire financial history public information.