Bitfunder operator Jon Montroll gets prison sentence
Montroll gets to spend 14 months in prison after having pleaded guilty to securities fraud and obstruction of justice.
The criminal proceedings against Jon Montroll, the operator of Bitcoin-related services WeExchange and Bitfunder.com, ended on July 11, 2019, with Judge Richard M. Berman of the New York Southern District Court delivering a judgment in the criminal case.
The defendant was sentenced to 14 months of imprisonment and 3 years of supervised release. The court recommended to the Bureau of Prisons that the defendant be placed in the FCI Camp facility Bastrop in Texas or the FCI Camp facility Texarkana in Texas.
As FinanceFeeds has earlier reported, Montroll’s counsel has argued in favor of a probationary sentence. But the Government has pushed for a harsher punishment – a sentence within the range of 27 to 33 months’ imprisonment.
Montroll has pleaded guilty to securities fraud and obstruction of justice for deceiving investors and potential investors of virtual security known as Ukyo.Loan in connection with Montroll’s discovery of a catastrophic computer hack of his business, and for his lies to the U.S. Securities and Exchange Commission during the SEC’s investigation into that hack.
By December 2012, Montroll operated two different Bitcoin-related web services. First, Montroll operated WeExchange, Australia, Pty. Ltd, known as “WeExchange,” which functioned as a bitcoin depository and currency exchange service. Second, Montroll launched “Bitfunder.com,” an online platform that facilitated the purchase and trading of virtual shares in investment opportunities offered mostly by others. Those two services interlinked: Users of BitFunder were required to create a WeExchange account to facilitate BitFunder transactions, and any investments through BitFunder were held on WeExchange in what was referred to as the “WeExchange Wallet.”
Beginning in late July 2013, and continuing for about a month, until August 27, 2013, a hacker or hackers exploited a weakness in BitFunder’s programming code to confer credits to themselves that they did not earn. When Montroll discovered the Exploit, he attempted to cover it up. Montroll transferred a large amount of bitcoin he had stored elsewhere into the WeExchange system to backfill the losses, but did not disclose the fact of the Exploit to his users.
By the early fall of 2013, the Securities and Exchange Commission (SEC) began investigating the Exploit and Montroll’s response. As part of that investigation, the SEC conducted an investigative deposition of Montroll. During that interview, Montroll falsely denied to the SEC that the Exploit had caused losses and falsely claimed that he had managed to detect and halt the Exploit within its first few hours. A few weeks after the initial interview, Montroll admitted that the Exploit had, in fact, been successful and that users’ bitcoins had been taken.
On February 20, 2018, the United States charged Montroll by Criminal Complaint with perjury and obstruction of justice.
