The former CEO of Bitfunder, an exchange that collapsed in 2013 after being hacked, has been jailed for fraud after admitting he covered up the attack that cost customers more than 6,000 BTC. Jon Montroll was handed a 14-month prison term after pleading guilty to federal charges of securities fraud and obstruction of justice for hiding the theft from regulators which is worth some $60 million in today’s prices.
Screenshots Fail to Fool SEC
Bitfunder was hacked in July 2013 but Montroll failed to disclose this to customers, instead attempting to misappropriate the funds to hide the lost Bitcoin, according to federal prosecutors, in a case that has echoes of the Mt. Gox ordeal. The U.S. Securities and Exchange Commission (SEC) became involved in the fall of 2013, at which point Montroll misled regulators by assuring them that the exchange’s funds were safe through a fraudulent screenshot of balance statements. He also continued to accept investments and deposits in an attempt to pay off creditors during this period.
The SEC and the Department of Justice (DOJ) hit Montroll with the charges in February 2018, to which he pleaded guilty in July 2018, and now faces 14 months in prison and three years’ probation as a result.
Civil Suit Pending
Montroll’s troubles don’t end with a prison sentence however, as he now faces civil suits from those who lost their coins in the hack. Part of the February 2018 charges included a civil charge of “operating an unregistered securities exchange and defrauding users of that exchange”, as well as the selling of unregistered securities that were supposedly “investments” in his business.
Montroll is alleged to have absconded with these funds, meaning that litigants have a chance of getting at least some of their funds back, providing he hasn’t been forced to spend everything on legal fees.