US Govt shutdown hampers progress in lawsuit targeting BitFunder operator Jon Montroll

Maria Nikolova

The shutdown has suspended the SEC’s staff’s review of Montroll’s financial statements.

The partial shutdown of the US government continues to affect the work of a number of regulatory bodies, including the Securities and Exchange Commission (SEC). Many of the actions that the SEC has taken are now put on hold.

Earlier today, it became clear that the shutdown is hampering the progress made in the case targeting Jon Montroll, the operator of now-defunct Bitcoin platform BitFunder. Counsel for the defendant has filed a Status Report with the New York Southern District Court, stating that the shutdown is preventing the settlement reached between the SEC and the defendant in 2018 from completion.

The SEC and Montroll have agreed on proposed settlement terms subject to the completion by Montroll of financial statements and approval of the settlement by the Commission. The counsel for Montroll says that, due to a lapse in appropriations for the federal government, the Commission’s offices are currently closed, and will not re-open until an appropriation has been enacted. The shutdown has suspended the Commission’s staff’s review of the financial statements, and Montroll’s ability to communicate with the staff about the financial statements.

If, after the Commission’s offices re-open, the staff deems the submission satisfactory for the their purposes, they will submit the proposed settlement to the Commission for approval.

In February 2018, the SEC charged Bitfunder, a former Bitcoin-denominated platform, and its founder – Jon Montroll, 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.

In its complaint, the SEC alleges that BitFunder was an unregistered online securities exchange and that Montroll defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins.The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well.

The SEC’s complaint charges BitFunder and Montroll with violations of the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctions and disgorgement plus interest and penalties.

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