BitFunder operator Jon Montroll has sentencing adjourned
Jon E. Montroll has his sentencing adjourned to December 11, 2018, as he claims to need more time to resolve civil matters.
Less than three months after Jon Montroll, operator of purported Bitcoin platform BitFunder, pled guilty to charges of securities fraud and obstruction of justice, the criminal case against him focuses on formalities, such as the timing of his sentencing.
On October 4, 2018, Judge Richard M. Berman of the New York Southern District Court postponed the sentencing of the defendant, thereby granting the defendant’s request. In that request, Montroll said he needed additional time to continue to work to resolve two civil matters in advance of sentencing and to obtain material necessary for his sentencing submission.
Accordingly, Montroll’s sentencing is adjourned to December 11, 2018.
Montroll, a/k/a “Ukyo,” operated two online bitcoin services: WeExchange Australia, Pty. Ltd. (WeExchange) and BitFunder.com (BitFunder). WeExchange functioned as a bitcoin depository and currency exchange service. BitFunder facilitated the purchase and trading of virtual shares of business entities that listed their virtual shares on the BitFunder platform.
Between the launch of Bitfunder, in or about December 2012, and at least in or about July 2013, Montroll converted a portion of WeExchange users’ bitcoins to his personal use without the users’ knowledge or consent. He exchanged bitcoins taken from WeExchange into US dollars, then spent those funds on personal expenses, such as travel.
In addition, since July 18, 2013, Montroll has promoted a security referred to as “Ukyo.Loan.” He encouraged investors to “think of [Ukyo.Loan] as a sort of round-about investment” in BitFunder and WeExchange and, at the same time, described Ukyo.Loan as “a personal loan” and “for private investment purposes.”
During the summer of 2013, one or more individuals (the so-called “Hackers”) exploited a weakness in the BitFunder programming code to cause BitFunder to credit the Hackers with profits they did not, in fact, earn. As a result, the Hackers were able to wrongfully withdraw from WeExchange approximately 6,000 bitcoins, with the majority of those coins being wrongfully withdrawn between July 28, 2013, and July 31, 2013. Due to this “exploit”, BitFunder and WeExchange lacked the bitcoins necessary to cover what Montroll owed to users.
Montroll did not disclose what happened to users of BitFunder and WeExchange, or investors in Ukyo.Loan. Instead, he continued to promote and sell Ukyo.Loan to customers and, on at least one occasion, falsely represented to customers that BitFunder was commercially successful. As a result of his omissions and misrepresentations, the defendant raised approximately 978 bitcoins through Ukyo.Loan after his discovery of the Hackers’ actions.
The Securities and Exchange Commission (SEC) has also brought an action against Montroll and Bitfunder. The regulator has charged the defendants with operating an unregistered securities exchange and defrauding users of that exchange. The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities. As per recent reports, the parties in this case have marked progress in their settlement discussions.