WASHINGTON (Legal Newsline) — The Securities and Exchange Commission (SEC) announced charges Feb. 21 against BitFunder, a Bitcoin-denominated platform, and its founder Jon E. Montroll, for allegedly operating an unregistered securities exchange, as well as for defrauding users of that exchange.
“We allege BitFunder operated unlawfully as an unregistered securities exchange,” said Marc Berger, director of the SEC’s New York Regional Office, in a statement. “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.”
BitFunder purportedly defrauded exchange users by failing to register as an online securities exchange, misappropriating consumer bitcoins, and failing to disclose a cyber attack on the company in which 6,000 bitcoins were stolen.
“As alleged in the complaint, Montroll defrauded exchange users by misappropriating their Bitcoins and failing to disclose a cyberattack on the exchange’s system and the resulting bitcoin theft," said Lara S. Mehraban, associate regional director of the SEC’s New York Regional Office, in a statement. "We will continue to vigorously police conduct involving distributed ledger technology and ensure that bad actors who commit fraud in this space are held accountable.”