Blockchains, Cryptocurrency, Crime and the Law

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The popularity of blockchain technology and cryptocurrencies like Bitcoin and Ethereum is exploding. The total market value of all virtual currency is $135 billion. Established venture capital firms are pouring tens of millions of dollars into cryptocurrency hedge funds. Investors are buying and storing cryptocurrency in hopes of new opportunities and huge profits.

Almost every industry you can think of is researching and integrating blockchain technology into its long-term plans. This new technology promises to help businesses more efficiently share information, cust costs, and increase profits.

Along with other emerging technology like VR, AR, MR and AI, I believe blockchains are going to exponentially change business, government and society just like the printing press and Internet have already done.

Should you be using blockchains in your business? Should you be investing in cryptocurrency?

I share my thoughts, and answers to these two questions, in this post.

What is a blockchain? The easy answer is to think of this technology as a bleeding edge digital ledger or table, that is used to track credits and debits. It connects or “chains” cryptographically verified transactions into a sequence of lists or “blocks” all managed by a mathematical function to keep track of things. For example, who owns the digital currency, who built and shipped specific building supplies or maybe a new smartphone. Common records are created and accessible to everyone but controlled by no one.

I believe that eventually, major industries are going to be using blockchain technology to instantly monitor the many complex parts of supply and demand needs like ordering, shipping, and quality control. Smart companies will be using blockchain and artificial intelligence (AI) to improve the customer experience. Future technology could turn global product networks into decentralized marketplaces.

Companies like Walmart and Danish shipping giant, Maersk, are going to be doing in seconds what usually takes days or weeks. Accenture, Microsoft and the United Nations are building a blockchain to help with digital identity and global security.

On August 1, 2017, the state of Delaware established a new law allowing companies to keep shareholder records on a blockchain. Eventually, almost everything you need to do to run, manage and grow your business, or a Fortune 500 company (two-thirds are incorporated in Delaware), will be done via blockchain. Better organization and accountability will be the byproducts of this new technology. In a perfect marketplace, better efficiency should result in lower prices to the consumer.


Blockchain technology is the digital foundation behind cryptocurrency. Two well known digital currencies are Bitcoin and Ethereum. These are digital assets which work as exchange tools (digital money) using cryptography to make secure and organized transactions.

Right now, the platform Coinbase is storing $9 billion in cryptocurrency for 9 million customers. It’s traded $25 billion on its retain brokerage and institutional exchanges. The company is valued today at $1.6 billion because of recent venture funding.

People and companies from around the world are using cryptocurrency to buy, sell, and invest in other companies. In my opinion, this technology is not going away.

I do not recommend or otherwise endorse the following products or services. Investments of any type, including in cryptocurrency, must only take place after due diligence is completed. Again, please pay attention to our written disclaimer. Having said that, if you want to learn more about these technologies and potential opportunities, you may want to take a look at the following resources:

If you’d like to learn more about the cryptocurrency side of blockchain technology, check out “The Bad Crypto” podcast with Joel Comm and Travis Wright.

Another intriguing resource for investors is being offered by James Altucher. Click here and once again, only buy or invest at your own risk.

Please note that both Joel and James have been on my podcast.


With the good comes the bad and we are now living in the wild west of blockchain technology. There’s a battle going on, right now, between the criminal hackers and companies building and working on this new technology.

Technology changes as an exponential pace, and it’s challenging to protect blockchain assets from criminals who are interested in stealing your information, records, and money. For example, in 2014, the Mt. Gox exchange was hit by hackers who took $500 million in bitcoins. Just last summer, the Hong Kong cryptoexchange Bitfinex was robbed of $72 million.

In 2016, $28 million in virtual currency losses were reported to the FBI’s Internet Crime Complaint Center. This number represents mostly individual investors. Experts believe unreported institutional losses are substantially higher.

Cybercrime, in general, is rising. Last year along the theft losses were $2.3 billion. Cryptocurrency theft makes up a much greater proportion than traditional cyber financial bank losses.

As of this date, not a single person has been caught and prosecuted for stealing money from major bitcoin exchanges. Because it is so hard to find and prosecute criminals, blockchain related thefts and especially, those relating to cybercurrency, are the focus of criminal efforts.

Bitcoin ownership is anonymous, and this feature together with other current security flaws makes cryptocurrency theft attractive to the bad guys. There is no consumer protection, and experts are not sure consumer protection will ever be built into cybercurrency products.

Most of the platforms like Coinbase are regulated like money transmitters PayPal and Western Digital. What this means is that cryptocurrency is not protected by the FDIC or consumer protection laws. Because of a lack of proper tax reporting, the IRS is also using the courts to get user record details.

It’s also important to understand that private keys (special numbers) are needed to access your cryptocurrency. If you lose your private key, then you lose your cryptocurrency. For most currencies, there is no recourse.

The good news is that new private companies like Chainalysis, track virtual currency movement and investigate illegal use. Dark Net market places AlphaBay and digital exchange BTC-e are under criminal indictments because of this new technology. I expect more legal action to come on a global scale.

One company, Xapo, offers guarded vaults, on five different continents, to help protect your cybercurrency. Several are more than a kilometer deep. This is where the encrypted private keys are stored. The servers have never been, and are not connected to, the Internet.

Obviously, this type of effort represents a great deal of time, effort, and money allocated to protecting consumers. It also tells me that any server connected to the Internet may have a possible security flaw. And where’s there’s a flaw; there’s the potential to lose your money.


State, Federal and International laws, much less global geographic issues, make it difficult, if not impossible, to monitor legitimate blockchain business and cybercurrency investments. Cyber theft by criminals is difficult, if not impossible, to prevent. When something bad happens, holding criminals accountable and getting your money back is almost impossible.

With regular investments and banking, your money is protected by the Federal government and private insurers. To date, this same type of protection is not available to blockchain and cybercurrency investors.


Make no mistake about it. We are living in the wild west of blockchains and cryptocurrency technology. And while I believe both technologies are the future of commerce, they also create new security and legal challenges.

If you’re going to use blockchain technology in your business, focus on security. If you’re going to invest in cryptocurrency, do so at your own risk and only do business with industry leaders. Along the same lines as what I tell my friends when they go to Las Vegas, only invest what you can afford to lose. I once worked for Caesars Tahoe. Trust me on this 😉

In the law, we use a term known as “caveat emptor” which is Latin for let the buyer beware. Someday, I see almost everyone using blockchain and cryptocurrency in the real, digital and virtual worlds. But until technology and security is improved, and until there is Federal protection like the FDIC, it’s going to be awhile before I use either of these technologies to do business, commerce, or invest.

Mitch Jackson is a California trial lawyer who enjoys combining law, social media, and technology to disrupt, hack and improve his clients’ companies, causes, and relationships. Connect on social media at Mitch.Social

Author: Mitch Jackson

I'm a California trial lawyer trying to fix the world one client, cause, and digital interaction at a time.

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