The founder of a Bitcoin exchange was arrested yesterday during a probe into a huge cryptocurrency heist.
Jon Montroll, founder of BitFunder, is accused of lying to American regulators in a bid to avoid taking responsibility a theft in which hackers escaped with a stash of Bitcoin that is now worth almost $70 million.
Federal prosecutors in Manhattan announced the charges against BitFunder founder Jon Montroll the same day the U.S. Securities and Exchange Commission filed a lawsuit accusing him and the company of running an unregistered securities exchange that defrauded its users.
‘As alleged, the defendant repeatedly lied during sworn testimony and misled SEC staff to avoid taking personal responsibility for the loss of thousands of his customers’ Bitcoins,” Manhattan U.S. Attorney Geoffrey Berman said in a statement.
Montroll, a resident of Saginaw, Texas, was charged in a criminal complaint with perjury and obstruction of justice and was arrested in his home state. A lawyer for Montroll, 37, did not immediately respond to a request for comment.
Prosecutors said Montroll operated WeExchange Australia, which functioned as a Bitcoin depository and exchange service, and BitFunder.com, which allowed users to sell virtual shares of business entities in exchange for bitcoins.
According to a criminal complaint, hackers in 2013 exploited a weakness in BitFunder’s programming code to cause it to credit them with profits they had not actually earned, allowing them to withdraw 6,000 bitcoins from WeExchange.
Due to the hacking, BitFunder and WeExchange lacked enough bitcoins to cover what Montroll owed users, prosecutors said. Yet they said that during a subsequent SEC probe, Montroll denied that the exploit the hackers used had been successful.
Prosecutors said that he also produced to the SEC a screenshot that falsely represented how many Bitcoins were available to BitFunder users as of October 2013.
Three days after the hacking, Montroll, using the alias, ‘Ukyo’, participated in an online chat in which he sought the help from the principal of a different exchange to track down ‘stolen Bitcoins’, prosecutors said.
He later transferred some of his own Bitcoins into WeExchange to conceal the losses, prosecutors said. BitFunder shut down in 2013.
At the time, the more than 6,000 Bitcoins the hackers stole were worth about $775,075, the SEC said in its lawsuit. Today, those coins are worth about $69.6 million, according to the criminal complaint.