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SEC Finalizes Case against BitFunder Operator
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An updated case has been submitted against Jon Montroll, the operator of Bitfunder and WeExchange. Montroll was sentenced to 14 months of imprisoned and 3 years of supervised release over securities fraud.
The SEC and the defendant, Jon Montroll, have agreed on a proposed settlement. The document has been submitted to the New York District Court this past Friday.
On July 11 2019, Montroll sentenced in a criminal case with a 14-month prison sentence and forced to pay $167,428. Any restitution will be made by Montroll and is set to be determined on September 10, 2019. The expanded crackdown is another step by the SEC to stop unlicensed broker-dealers and securities trading.
In December 2012, Montroll operated two Bitcoin-related platforms called WeExchange and BitFunder. Bitfunder was intended to be a platform to allow for the purchasing of ‘virtual shares.’ The two services were linked and BitFunder traders needed to create a WeExchange wallet to use the platform. However, beginning in late July 2013, hackers exploited a weakness on BitFunder and gave themselves credits they did not earn. Rather than announcing the breach, Montroll did not disclose the information to use users and transferred Bitcoin to make up for the losses.
The SEC began investigating Montroll in fall of 2013. Due to also lying to the SEC, saying that the exploit was resolved ‘within a few hours,’ he was promptly charged with not just securities fraud but also obstruction of justice.
With the expanded recommendation against Montroll, the SEC hopes to make clear that there is no middle-ground when it comes to securities fraud.
Do you believe the SEC is sending a message to the rest of the security token space with this conviction? Let us know your thoughts below.
Image courtesy of InvestmentNews.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
