Digital currency Bitcoin may not be recognized by traditional financial markets yet, but the rising profile of the digital currency has yielded appreciation from one audience: fraudsters and scammers.

Recently, a Twitter user with the handle “Fontas” urged his followers to take part in a Bitcoin-based pump-and-dump scheme, tweeting “For insane profits come and join the pump.” In an online chat with The New York Times, Fontas (who refused to divulge his identity) said, “the lack of regulations allows everything to happen,” with no fear of legal action.

Because the currency – created by algorithm and currently valued at more than $12 billion – is unregulated, legal enforcement based on deceptive offers or financial regulations is impossible. The NYT reported that dozens of instances of Bitcoin theft (such as an illegal transfer) have occurred in recent months; some incidents involved millions of dollars in Bitcoin value.

Digital currency has appeared on the docket in a handful of cases in the United States but only when the currency has caused real-world problems. And because the Bitcoin realm remains a legal gray area, theft and hacking leave victims without much recourse.

In one example, European payment processor BIPS acknowledged in November that it lost roughly $1 million in Bitcoins after being hacked. With the lack of legal resources, BIPS wrote on its website that the company is “unable to reimburse Bitcoins lost unless the stolen coins are retrieved.” While the Danish police are “examining the case,” the company noted that the authorities could “not classify this as a theft due to the current nonregulation of Bitcoin.”

The scams are not without some repercussion, however. Efforts like Fontas’ resulted in an announcement from officials in China cautioning consumers that they assumed their own risks with Bitcoin; the Bank of France also issued a warning to investors.

And as Bitcoin’s profile continues to rise, so has the potential for attention from regulators. Federal agencies in the United States have indicated they are keeping an eye on virtual currency while “digital currency” made the list of the top ten threats to investors as compiled by the North American Securities Administrators Association for the first time in October.

The question of jurisdiction remains, however: who should be policing fraud or theft of Bitcoin? As is typical in the law, the answer depends. If Bitcoin is deemed to be currency or commodity, the Commodity Futures Trading Commission would be in charge, but the Securities and Exchange Commission would have authority if the decision were made that Bitcoin is a security.

Why it matters: The law is notoriously two steps behind when it comes to keeping up with technology and fraud. Bitcoin presents a combination of the two that currently leaves consumers and financial institutions willing to trade in it without recourse in the risky world of virtual currency. For now, investors in the burgeoning digital money world should use caution given the lack of regulation and law enforcement.