Fighting the war on bitcoin, one scam at a time

Before Forbes decided to take the Silk Road’s Dread Pirate Roberts public, it was perhaps the Atlantis Market that was stealing the illicit marketplace spotlight. That’s because it decided to market its site via a very public way to help potential users understand it benefits. Yet it is amazing that a site could be so brazen about offering illegal goods such as marijuana, cocaine and stolen items.

In what could be an even more brazen move is how Atlantis has now closed, and has defiantly decided not to refund its customers, ultimately branding it as a complete scam. Should anyone be surprised? Really, when anyone tries to do something illegal is so out and in the open with criminal intentions, law enforcement will as a result make a concerted effort to clamp down. Atlantis has had heat on it from the start, and the possibility that its intention was simply to take money from people is a very real proposition.

Supply and demand, plus relative security away from the variances of conducting business on the street, makes illegal marketplaces valuable. That is not going to change, and it might end up being a bad thing for bitcoin. Sure, there’s the innovative aspect of it, and technology spawned from industries such as pornography have benefited the web as a whole. But how can you justify a place where people can sell things that are illegal? It’s hard to, and that’s why governmental bodies such as FinCEN have such an interest in bitcoin.

Crime has a long history of using technology to circumvent policing. As soon as law enforcement catches on, criminals have no choice but to evolve. One example of this can be seen in the HBO television series The Wire, which coincided with the time in the early 2000s when mobile phones were quickly replacing the pager. As the series progressed and the Baltimore drug dealers realized that the codes being used via pagers and public phones had been cracked by a special police unit, they started using throwaway, or “burner”, cell phones to conduct illicit business.

What’s interesting is how regular businesses often become intertwined with crime. In the case of The Wire, once the police realized that drug dealers had started using cell phones, they requested the help of a phone company selling the devices to gather information. But the company would not cooperate without a warrant, as sometimes the specter of money influences more than just the concept of moral values.

This synergistic portrayal of legal and illegal can be viewed with shades of grey. On one hand, a mobile phone operator that sells the service of privacy and relative anonymity has the right not to cooperate with police without a warrant. But at the same time, it also can perhaps undermine its legitimate business model. Bitcoin and other virtual currencies may experience this same fate.

In hindsight, given Atlantis Market’s desire for publicity, it would have been reasonable to assume that it might have been a scam. Indeed, the initial closure of Atlantis was done under the auspices of “security reasons outside of our control”.

It is one of the reasons why organizations like this normally act under a decentralized organizational structure. The Tor Project, which allows a degree of anonymity by utilizing certain practices, is funded through donations. Defense Distributed, which had a 3D printer blueprint of a gun called the Liberator on its site until the State Department requested it be taken down, is a nonprofit group. Both of these organizations espouse the idea that information should be free even if there is a collateral cost to such ideals.

Atlantis did not behave in this way. After releasing what could be considered a YouTube commercial, it even solicited the services of a marketing professional, offering to pay such a person in bitcoins. It offered fast service, and peace of mind that contraband would be delivered safely to doorsteps via postal mail. Does that not strike anyone as odd? It is easy to identify supposed inaccuracies after the fact; the “hindsight is 20/20” adage is a valid connotation here.

The problem is what Atlantis represents to the bitcoin community: continued negative connotations associated with virtual currencies since they are unregulated. The Wired story about the homeless using bitcoins, for example, is a poignant tale. These people desperately need money. But what will happen to bitcoin if or when it becomes popular on the street? We won’t be so worried about what Atlantis has done to tarnish bitcoin, as it may become a bigger problem when people are passing them around for items like drugs and guns on the corner.

It comes down to community efforts right now to try to legitimize bitcoin. Education, not regulation, is the mantra of the Bitcoin Foundation, and that’s a prescient mode of operation for the nonprofit. Every government, every legitimate business has its right to adopt policies on virtual currencies. Having the right information is important to do this, and that’s what the Foundation is for.

The @NewYorker: "The Foundation is not pro-regulation as some have claimed, but it is pro-education" http://t.co/y8XUxNCTA9 #bitcoin

— Jon Matonis (@jonmatonis) September 25, 2013

We’re only at the beginning for the potential of virtual currencies. And unfortunately where there is good, there will be bad. Anything that has value is the target of abominable actors. The question is: how can we stop Atlantis and others from stealing virtual money in this embryotic environment?

What can be done to stop entities like Atlantis from stealing money under the auspices of bitcoin? Do you believe that legal ramifications could ever conceivably solve that problem? Let us know in the comments.

Featured image: Flickr