Cryptocurrency Bitcoin company owner faces up to 20 years in prison for fraud

Jon E. Montroll from Saginaw, Texas is facing up to 20 years in prison for stealing thousands of Bitcoins from customer funds, running an unregistered securities exchange, and lying to US security regulators after his cryptocurrency exchange, BitFunder, was hacked, says Bloomberg news.  Montroll pleaded guilty to securities fraud and obstruction of justice before US Magistrate Judge James L Cott on July 21, 2018, and now faces up to 20 years in prison. Montroll, 37, operated two defunct cryptocurrency services. One of the services was WeExchange Australia Pty Ltd, a cryptocurrency exchange and Bitcoin depository.  BitFunder was a service whichaided the sale of virtual shares from business entities in exchange for cryptocurrencies like Bitcoin.

The  SEC says that  Montroll also did not register his securities exchange. “Platforms that engage in the activity of a National securities exchange, regardless of whether that activity involves digital assets, tokens, or coins, must register with the SEC or operate pursuant to an exemption,” said Marc Berger, the director of the SEC’s New York Regional Office.

Montroll  defrauded  investors by taking the Bitcoin deposits from WeExchange users’ and spending it on himself. Instead of providing the services required, he exchanged the cryptocurrencies for fiat currency and spent the money on personal expenses like travel and groceries.

Prosecutors also mentioned that in July 2013, Montroll took peoples’ investments in a security known as Ukyo.Loan. He lied to investors by promising them that, by handing over their cryptocurrency investments, they would earn interest every day and could reclaim their shares at any given time.

In July 2013, Montroll’s cryptocurrency exchange BiFunder was hacked. The hackers entered the system and stole approximately 6,000 Bitcoins worth $775,075. It would be worth approximately $46 million today.

Montroll did not have enough to repay his investors from Ukyo.Loan and users from BitFunder and WeExchange. He therefore decided not to tell his users of the hack and continued to take their funds. Montroll also continued to promote BitFunder as a successful cryptocurrency exchange, which helped him raise an additional 978 Bitcoins.