The commission alleges BitFunder and Founder Jon E. Montroll operated an unregistered online securities exchange and defrauded its users by misappropriating their bitcoins. In addition, the SEC alleges Montroll and the exchange failed to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins. And the SEC also alleges that Montroll sold “unregistered securities” that he said were investments on the exchange — and misappropriated funds from that as well.
“We allege that BitFunder operated unlawfully as an unregistered securities exchange,” Marc Berger, director of the SEC’s New York regional office, said in the release. “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. We will continue to focus on these types of platforms to protect investors and ensure compliance with the securities laws.”
In the complaint, which was filed in federal district court in Manhattan, the SEC also charged BitFunder and Montroll with violations of the anti-fraud and registration provisions of the federal securities laws. As a result, the complaint seeks permanent injunctions and disgorgement, plus interest and penalties.
“As alleged in the complaint, Montroll defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on the exchange’s system and the resulting bitcoin theft,” Lara S. Mehraban, associate regional director of the SEC’s New York regional office, said in the release. “We will continue to vigorously police conduct involving distributed ledger technology and ensure that bad actors who commit fraud in this space are held accountable.”
In a parallel criminal case, the U.S. Attorney’s Office for the Southern District of New York filed a complaint Wednesday (Feb. 21) against Montroll for alleged perjury and obstruction of justice during the SEC’s investigation.