In the complaint brought by the SEC, the federal agency alleged that BitFunder and its founder Jon E. Montroll violated the anti-fraud and registration provisions of the U.S. security law. As alleged by the SEC, BitFunder operated as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins. It also failed to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins. In addition, the SEC alleges that Jon E. 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, confirmed the SEC’s position in the BitFunder case, “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.”
In its complaint, the SEC seeks permanent injunctions, disgorgement, interest and penalties. Because the SEC can only seek civil remedied, it worked with the U.S. Attorney’s Office for the Southern District of New York in regards to the criminal persecution. The U.S. Attorney’s Office initiated a criminal investigation and filed a complaint against Jon E. Montroll for perjury and obstruction of justice during the SEC’s investigation.