BitFunder CEO Charged by SEC with Defrauding Exchange Users
The SEC has formally announced charges of operating an unregistered securities exchange and defrauding users against BitFunder founder Jon E. Montroll. Although BitFunder hasn’t been active since 2013, its alleged fraud included the loss of over 6,000 bitcoins, which today represents close to $70 million USD. The Department of Justice (DOJ) also announced that Montroll has been arrested and taken into custody.
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Defrauding Exchange Users
As the digital asset ecosystem continues to develop, many users have come to terms with the space’s premature mayhem, recognizing that most exchanges can’t be trusted.
An example of an exchange that users trusted back in 2012-2013 was BitFunder.com. BitFunder allowed users to sell virtual shares of businesses in exchange for bitcoins and even had a brother site called WeExchange that would let users exchange bitcoins for USD, CAD, and AUD.
After BitFunder was eventually hacked for up to 6,000 bitcoins, CEO Jon E. Montroll denied the exploit and falsely represented how many bitcoins were available to BitFunder and WeExchange users. Peaking at $16 million in assets back in 2012, investors fled once they realized they couldn’t retrieve their coins.
Now after years of diligence by the SEC including getting depositions from multiple parties, the agency has announced charges against Montroll for making false and misleading statements regarding security sales, defrauding users, and operating an unregistered exchange.
Lara S. Mehraban, Associate Regional Director of the SEC’s NY regional office, noted:
“As alleged in the complaint, Montroll defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyber attack on the exchange’s system and the resulting bitcoin theft. We will continue to vigorously police conduct involving distributed ledger technology and ensure that bad actors who commit fraud in this space are held accountable.”
SEC Focusing on Investor Protection
Alongside the wild price speculation of cryptocurrencies, investor protection agencies such as the SEC and CFTC have begun to be more vocal on their positions regarding the sale of digital assets.
This has made many teams considering ICOs step back and reconsider. It has also led to the development of SEC compliant tokens such as Polymath which aim to set the new standard for tokens having security-like characteristics.
That may be the norm in the United States going forward.
Do you think it is the SEC and DOJ’s responsibility to police cryptocurrency exchanges? Let us know what you think in the comments below.
Images via WSJ, Stockmasters