The founder and CEO of BitFunder, a bitcoin trading and wallet service that is no longer operational, has been sentenced to fourteen months in prison for securities fraud and obstruction of justice. Jon Montroll launched BitFunder in December 2012 and it was shuttered in November 2013. It consisted of two services, Bitfunder.com – a trading service, and WeExchange – a bitcoin depository service.
The DOJ arrested Montroll last year and charged him with defrauding exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on the exchange’s systems which resulted in the loss of 6,000 bitcoins. According to the DOJ, Montroll did not disclose the attack to users and repeatedly maintained that the business was doing well. He even exchanged his bitcoin into US dollars and spent them on travel and groceries. Montroll stuck to the same response and even provided false system screenshots to authorities, when he was arrested last year.
The hack notwithstanding, Montroll started another service – Ukyo.loan – advertised as a “round-about investment” into BitFunder and WeExchange for customers eager to invest in the service. In exchange for their investment, customers would receive daily interest and their shares could be redeemed anytime at face value. It was reported in July that he was seeking a plea bargain.