SEC Charges Former Bitcoin-Denominated Exchange and Operator With Fraud

Marco Green
February 23, 2018

BitFunder was launched in December 2012 and closed operations in November 2013.

In a separate action, the SEC is following civil charges against Montroll claiming that he provided unauthorized securities exchange and swindled investors.

Lara Mehraban, Associate Regional Director of the SEC's New York ‎Regional Office, added: ‎"As alleged in the complaint, Montroll defrauded exchange users by misappropriating their ‎bitcoins and failing to disclose a cyberattack on the exchange's system and the resulting ‎bitcoin theft". At the time, the stolen cryptocurrency was valued at $775,075 but as current prices, it would be worth more than $63 million. The complaint seeks permanent injunctions and disgorgement plus interest and penalties. As a result of the hack Montroll and the companies did not have the bitcoins to cover the user funds.

Lara Mehraban, a director at the SEC's NY division, noted that the commission would carry on monitoring activities in the blockchain space and make sure that parties who engage in fraud are penalized accordingly.

In a lawsuit filed in US federal court in Manhattan, the SEC said the owner ‎of bitcoin venue, aka Ukyo, failed to disclose a cyberattack on BitFunder's system that ‎resulted in the theft of more than 6,000 bitcoins.

Prosecutors said Montroll operated WeExchange Australia Pty Ltd, which functioned as a bitcoin depository and exchange service, and, which allowed users to sell virtual shares of business entities in exchange for bitcoins. "We will continue to focus on these ‎types of platforms to protect investors and ensure compliance with the securities laws". Montroll provided sworn testimony to the SEC's New York Regional Office in connection with their investigation into the hack and BitFunder's activities.

"As alleged, the defendant repeatedly lied during sworn testimony and misled SEC staff to avoid taking personal responsibility for the loss of thousands of his customers' bitcoins", said Geoffrey Berman, U.S. Attorney for the Southern District of NY, on Wednesday. In the summer of 2013 hackers exploited a weakness in BitFunder's code and withdrew approximately 6000 bitcoins from WeExchange. "It's said that honesty is always the best policy - this is yet another case in which this virtue holds true".

Montroll, a resident of Saginaw, Texas, was charged in a criminal complaint with perjury and obstruction of justice and was arrested in his home state.

Other reports by Click Lancashire

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