SEC Charges Former Bitcoin-Denominated Exchange and Operator with Fraud
Litigation Release No. 24078/March 23, 2018
SEC v. Jon E. Montroll and Bitfunder, 18-cv-1582 (S.D.N.Y.) (Feb. 21, 2018)
On February 21, 2018, the Securities and Exchange Commission charged a former bitcoin-denominated platform and its operator 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.
The SEC alleges that BitFunder and its founder, Jon E. Montroll, operated BitFunder as an unregistered online securities exchange and 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, filed in federal district court in Manhattan, charges Montroll with violations of Section 5 of the Securities Act of 1933 ("Securities Act"), Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and BitFunder with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint also charges BitFunder with violations of Section 5 of the Exchange Act and Montroll, as a control person under Section 20(a) of the Exchange Act, for BitFunder's violations of Section 5 of the Exchange Act. The complaint seeks permanent injunctions and disgorgement plus interest and penalties.