The case has led the SEC to issue a warning to investors to approach schemes involving virtual currencies with as much scepticism as they would for more traditional investments.

“Fraudsters are not beyond the reach of the [tag|SEC|]SEC[/tag] just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws,” said Andrew Calamari, the director of SEC’s New York regional office. 

“Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed.”

As a result, the SEC has charged Shavers with offering and selling investments in violation of the anti-fraud and registration provisions of the US securities laws, and has asked the courts to freeze Shavers’ assets indefinitely.

The case is one of the first criminal prosecutions related to Bitcoin, and the debate is still continuing as to whether the virtual currency, launched in 2009, is in need of official regulation.

Stateless and bankless, Bitcoins are not subject to regulation or fees, and therefore enjoy extreme volatility, according to its proponents. But according to regulators like SEC and the US Commodity Futures Trading Commission, this is exactly the problem. For example, Bitcoin value recently dropped by nearly 80 per cent from an all-time high of $266 before crashing to $55 on one particularly bleak April day, resulting in large losses for investors.

This prompted the [tag|CFTC|]CFTC[/tag] to consider regulating the virtual currency Bitcoin in a bid to protect consumers against the risks associated with the currency. But since the announcement in May, any formal suggestions for regulation have yet to be seen.

Similarly, growing concerns over the online cash being used for illicit activities also led the US Treasury Department to implement new money-laundering rules in April, forcing Bitcoin and other virtual currency firms to comply with strict regulation.

Potential regulation of Bitcoin has been a hot topic in the US and in several European countries for some time, with national regulators unsure on whether the virtual currency falls under their jurisdiction. This even led several national regulators to suggest that international virtual currencies might entail regulation by a global regulatory body, rather than on national levels alone.

However, with this latest criminal case by the SEC, the concerns relating to Bitcoin are becoming more apparent and specific regulation on virtual currencies might be a step closer.