SEC Charges Former Bitcoin-Denominated BitFunder Platform and Its Operator with Operating and Defrauding Users of an Unregistered Securities Exchange
On February 21, 2018, the Securities and Exchange Commission announced that it 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.
Marc Berger, Director of the SEC’s New York Regional Office stated, “We allege that BitFunder operated unlawfully as an unregistered 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. We will continue to focus on these types of platforms to protect investors and ensure compliance with the securities laws.”
The SEC’s complaint, filed in United States District Court, Southern District of New York, charges BitFunder and Jon E. Montroll with violations of the anti-fraud and registration provisions of the federal securities laws. The SEC’s complaint seeks permanent injunctions and disgorgement plus interest and penalties.
According to the SEC, in a parallel criminal case, the United States Attorney’s Office for the Southern District of New York today filed a complaint against Montroll for perjury and obstruction of justice during the SEC’s investigation.
Please click SEC complaint to review the complaint against Jon E. Montroll and BitFunder.
For additional information, see Spotlight on Initial Coin Offerings and Digital Assets.