U.S. SEC Charges Former Bitcoin-Denominated Exchange and Operator With Fraud

February 21

The U.S. Securities and Exchange Commission today 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 BitFunder and Montroll with violations of the anti-fraud and registration provisions of the federal securities laws.  The complaint seeks permanent injunctions and disgorgement plus interest and penalties.

In a parallel criminal case, the U.S. 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.

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David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. He is currently the Chairman of the Litigation Department of the firm’s New York office. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. Since 2008, David has been included in Chambers for his expertise in international arbitration.

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