By Brendan Pierson
NEW YORK (Reuters) – The operator of a shuttered bitcoin-denominated exchange pleaded guilty on Monday to federal charges that he defrauded investors and lied to U.S. securities regulators investigating the theft by hackers of virtual currency now worth about $46 million.
Jon Montroll, 37, pleaded guilty to securities fraud and obstruction of justice before U.S. Magistrate Judge James Cott in Manhattan, federal prosecutors said in a statement.
Daniel Levy, a lawyer for Montroll, had no immediate comment.
According to prosecutors, Montroll, of Saginaw, Texas, operated WeExchange Australia Pty Ltd, 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.
Prosecutors said that between the launch of Bitfunder in 2012 and at least July 2013, Montroll defrauded investors by taking WeExchange users’ bitcoins for himself, selling them for dollars and spending them on personal expenses.
In July 2013, according to prosecutors, Montroll solicited investments in a security he called Ukyo.Loan, after his screenname, Ukyo, promising investors that they would earn interest daily and could redeem their shares at any time.
In 2013, prosecutors said, computer hackers succeeded in withdrawing about 6,000 bitcoins from WeExchange that they had not earned, leaving Montroll unable to pay what he owed Ukyo.Loan investors and users of WeExchange and BitFunder. Nonetheless, they said, Montroll did not disclose the hack and continued to solicit investments.
Montroll subsequently came under investigation by the U.S. Securities and Exchange Commission, and lied to investigators in sworn interviews in 2013 and 2015 about when he learned of the hack and about other matters, prosecutors said.
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