LEIGH SALES, PRESENTER: The perils of doing business in cyberspace have added a whole new level of meaning to the warning "buyer beware".

The explosion in online trading has fuelled the rise of a new virtual currency known as the "Bitcoin". It's computer-generated and only exchanged on the web, where it's used to buy everything from music, pets and homewares to illicit drugs.

In the past 10 days, a buying frenzy fed by uncertainty in regular currency markets has seen its value double. A Bitcoin's now worth 180 old-fashioned dollars. Last week the global trade in the currency reached a billion dollars.

But, as they say, all that glitters is not gold, and 7.30 has uncovered one Bitcoin trader who's done a runner, leaving dozens of investors with hundreds of thousands of real-dollar losses.

Matt Peacock reports.

MATT PEACOCK, REPORTER: This was the registered headquarters for a major financial trader in the hot and highly volatile online currency known as Bitcoin.

(Talking through front door into house) G'day. I was looking for Colin. You wouldn't be Colin, would you? Matt Peacock from ABC Television.

MAN: No, no, no.

MATT PEACOCK: But here in the New South Wales country town of Orange, visits to several registered addresses failed to find the operators behind Crypto X Change, which was shut down last November, leaving hundreds of angry investors with hundreds of thousands in real-dollar losses.

Leo Treasure is one of them.

LEO TREASURE, BITCOIN TRADER: I emailed him many times saying, "What's happening?" He said there was a mix-up with the account details. He just kept buying time, feeding me lies.

MATT PEACOCK: Leo placed his trust and his Bitcoins with this man, Ken Armitt.

KEN ARMITT, CRYPTOXCHANGE.COM (on BitTalk TV): We provide the facility for people all around the world to buy and sell Bitcoins.

LEO TREASURE: Last year I sent 250 Bitcoins - it was about three grand at the time - to a guy who was running a Bitcoin exchange here in Australia. And he just didn't give me the money. So, now that's worth about 20 grand.

MATT PEACOCK: To understand Leo Treasure's loss, we need to enter the online exchange world of Bitcoin.

ADVERTISEMENT (male voiceover): Bitcoin is the first decentralised digital currency. Bitcoins are digital coins you can send through the internet.

MATT PEACOCK: Bitcoins' anonymous inventor launched the idea four years ago and since then its price has was fluctuated wildly. It's a virtual currency, a collection of encrypted computer codes that can be traded anonymously person-to-person, bypassing banks, which is why Bitcoins so popular with the Silk Road trade in illegal drugs on the dark side of the web.

Bitcoin's also increasingly seen as a safe haven, recently nearly tripling in value to an all-time high of $140 during the currency crisis in Cyprus. Last week, Bitcoin trade broke the billion-dollar mark.

DAVID GLANCE, TECHNOLOGY, UWA: We're getting used to the idea of the fact that all currencies in some way are virtual, and so I very much see that in this time of turbulence and increasing financial uncertainty, that there will be a place for cyber currencies like Bitcoin.

MATT PEACOCK: Two years ago, 27-year-old Leo Treasure began buying up Bitcoins on the internet, virtual coins that fans like him believe could one day replace money as we know it.

LEO TREASURE: Click on actions. QR code. And I get this QR code. And then to send the Bitcoins there, I just hold up my phone to the screen and I can scan it and send my Bitcoins from my account to this account and the transaction is instant. ...

... I think it's actually a lot safer than the money in banks. Look at Cyprus, for example.

DAVID GLANCE: Bitcoin can be viewed just in the same way that any other currency can be viewed and you can view that, the exchanges that have been set up in the same way that you would view a bank. The problem is that it's largely unregulated and it's a question of buyer beware.

KEN ARMITT (on BitTalk TV): The number one problem is trust. We need to - all exchanges need to have their clients' trust. So, you need to build up the reputation.

MATT PEACOCK: But the traders with Crypto X Change weren't beware enough, it seems, of the smooth-talking Ken Armitt. In November last year, Crypto X Change abruptly ceased trading and people from as far away as Atlanta, Georgia lost their money.

DAVID GOEL, BITCOIN TRADER, ATLANTA, USA: I have kind of lost all my money at Crypto X Change and I don't know what to believe about Ken. He's a very nice gentleman. And - but anyway, I have lost a huge chunk of my money and a lot of it was money I borrowed.

LEO TREASURE: I trusted him 'cause he had an Australian company number. I thought he was legit'.

MATT PEACOCK: 7.30 had no luck in Orange tracking down the two principals behind Crypto X Change, Ken and Colin Armitt.

VOICE ON MOBILE PHONE: Hello?

MATT PEACOCK: Oh, g'day, is that Colin Armitt?

VOICE ON MOBILE PHONE: It's (inaudible).

MATT PEACOCK: Oh, g'day. Colin, it's Matt Peacock here from ABC Television. Do you mind if I just record a few questions I wanted to put to you about Crypto X Change, the company you used to run?

VOICE ON MOBILE PHONE: No, you've got the wrong number, mate.

MATT PEACOCK: Sorry?

VOICE ON MOBILE PHONE: It's not me, mate. You've got the wrong number.

MATT PEACOCK: Who have have I got now?

VOICE ON MOBILE PHONE: You've got Lewis.

MATT PEACOCK: From ... ?

VOICE ON MOBILE PHONE: From All Ways Electrical.

MATT PEACOCK: From, sorry, where?

(Man hangs up phone)

MATT PEACOCK: Try him once more.

COMPUTERISED MOBILE PHONE MESSAGE: "The mobile phone you are calling is switched off. Please try again later."

MATT PEACOCK: Later 7.30 again rang this number for All Ways Electrical and a man identifying himself as Colin Armitt answered the phone. He said he's an electrician on the NSW Central Coast and has no knowledge whatsoever of Crypto X Change or its operating company, Kenseycol. But Colin Armitt's electrician's licence reveals that he is the same person who until last year was the sole director of Kenseycol.

Ken Armitt has been equally hard to find. Leo Treasure did speak to him by phone late last year through the Orange caryard, which now says it has nothing to do with him.

LEO TREASURE: I rang him, spoke to him, said, "Hey, I'm one of your customers."

MATT PEACOCK: "Where's my Bitcoins?"

LEO TREASURE: Yeah, I said, "Where's my money?" 'Cause I cashed out the Bitcoins using his website and he said, "The money should be getting sorted. We've just got a few issues. The guys are handling it. It'll be a few weeks away."

MATT PEACOCK: So what happened then? You rang back when it didn't happen, did you?

LEO TREASURE: Yeah and he just - I said, like, "I'm gonna have to take your company to court and possibly liquidate the company, and he said, "Go for it, mate. Do whatever you like."

MATT PEACOCK: 7.30 finally did make email contact with Ken Armitt, but he'd only say the Crypto X Change customers will soon be contacted by an appointed liquidator. That's cold comfort for Leo Treasure and his fellow traders.

DAVID GOEL: This is not play money for a lot of us. This is our life savings and more than that.

LEO TREASURE: I just eventually worked out he was never gonna send me the money. And I'm now in the process of trynna take this to court.

MATT PEACOCK: Despite this setback, Leo Treasure remains a Bitcoin enthusiast, along with others across the globe who believe the virtual currency does have a future.

DAVID GLANCE: It's a decentralised currency. It's not backed by any particular government. And so if everybody decided tomorrow not to support it, it would just vanish from the Earth. We've had problems like that with other currencies and it has defied expectations and is still around and has increased in value.

LEIGH SALES: Matt Peacock with that report.