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Co-Founder of Now-Defunct BitFunder Gets 14 Months Imprisonment

The co-founder of defunct Bitcoin exchange BitFunder has received 14 months imprisonment in connection with federal charges of obstruction of justice and securities fraud.

The operator of now-defunct Bitcoin (BTC) exchange BitFunder, Jon Montroll, has received a 14 months prison sentence following federal charges of obstruction of justice and securities fraud, finance and trading industry news outlet FinanceFeeds reported on July 12.

The proceedings against Montroll began last year. In July 2018, Montroll pleaded guilty to obstruction of justice, admitting that he provided false balance statements to the United States Securities and Exchange Commission in an investigation of the fake 6,000 BTC BitFunder hack in 2013.

The proceedings against Montroll ended on July 11, 2019, wherein Judge Richard M. Berman of the New York Southern District Court ruled to imprison Montroll for 14 months and determined 3 years of supervised release. Although Montroll’s counsel argued in favour of a probationary sentence, the government made a case for a sentence from 27 to 33 months’ imprisonment.

Recently, U.S. District Judge Sandra J. Feuerstein sentenced 44-year old New Jersey resident Blake Kantor to 86 months in prison for running a cryptocurrency-related scheme. Feuerstein also ordered Kantor to pay a total restitution of $806,405 distributed to the victims who invested in his scam, as well as forfeiture of $153,000 in stolen proceeds.

In May, the SEC initiated court proceedings against California resident Daniel Pacheco for allegedly operating a multimillion-dollar cryptocurrency pyramid scheme. The SEC accused Pacheco of conducting a fraudulent, unregistered offering of securities through two California-based companies, IPro Solutions LLC and IPro Network LLC, from January 2017 through March 2018.

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Texas Court Orders Defendants to Pay $400K for Fraudulent Bitcoin Scheme

A Texas Federal Court has ordered two defendants to pay $400,000 for allegedly conducting a fraudulent scheme to solicit Bitcoin from members of the public.

A Texas Federal Court has ordered two defendants to pay $400,000 for conducting a fraudulent scheme to solicit Bitcoin (BTC) from members of the public, the United States Commodity Futures Trading Commission (CFTC) announced on July 10.

Judge Reed C. O’Connor of the U.S. District Court for the Northern District of Texas filed an Order and Default Judgment on June 28, 2019, alleging that U.S. citizens Morgan Hunt and Kim Hecroft engaged in a fraudulent scheme to solicit Bitcoin from the public to invest in trading products like binary options, diamonds and foreign currency contracts. The defendants allegedly did business through entities called Diamonds Trading Investment House and First Options Trading.

The order specifically claims that the defendants “falsely claimed that they would use customer funds to invest in trading for the benefit of the customers, misrepresented their experience and track record as traders and portfolio managers, falsely told customers that they could not withdraw their purported investment profits without first paying a tax to the CFTC, and misappropriated customer funds.”

The court now requires that Hunt and Hecroft pay restitution and a $180,000 civil monetary penalty each, as well as imposing permanent trading and registration bans. According to the announcement, the defendants may be unable to repay victims due to a lack of sufficient funds.

In mid-June, the CFTC filed a complaint with the New York Southern District Court against the now-defunct United Kingdom-based entity Control-Finance Ltd, which allegedly defrauded more than 1,000 investors to launder at least 22,858 BTC.

As a recent report from Chainalysis revealed, the amount of Bitcoin spent on illegal transactions in 2019 could hit a record high of $1 billion, even as the ratio of illegal to legal transactions is shrinking.

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Craig Wright Uses Falsified Docs to Prove Innocence in Kleiman Case

Trial lawyer Stephen Palley has pointed out apparent evidence of fabrication in Craig Wright’s court documents in Kleiman case.

Self-proclaimed Bitcoin (BTC) creator Craig Wright has allegedly provided fabricated court documents to prove a trust deed with his plaintiffs, as seen from documents revealed by trial lawyer Stephen Palley on Twitter on July 3.

According to Palley, the self-styled Satoshi Nakamoto has failed to prove his case by presenting court documents that Palley alleges to be fake, as they contain multiple chronological discrepancies.

Among the exhibits filed with the District Court for the Florida Southern District on July 3, there is a document submitted as proof of cooperation between Wright and the now-deceased David Kleiman, whose lawyers filed the case against Wright in February 2018. Kleiman’s lawyers accuse Wright of stealing hundreds of thousands of Bitcoin — at press time valued at over $5 billion — after Kleiman’s death in April 2013.

While the presented deed of trust document is ostensibly dated Oct. 23, 2012, the metadata of the file indicates that the document was actually created after the death of Kleiman, as Palley found. The trust document apparently uses a 2015 copyright notice related to Calibri, the Microsoft Word font, indicating that the document could not be from earlier.

Alleged falsification of trust deed documents by Craig Wright

Alleged falsification of trust deed documents by Craig Wright. Source: Stephen Palley

Following the apparent accusation of Wright for forging the court documents, Palley wrote:

“I mean it makes sense that the inventor of bitcoin can time travel.  Your honor.”

In late June, Wright declared that he cannot comply with a court order to provide a list of all his early bitcoin addresses, claiming that he gave a key piece of information regarding the funds and wallets to Kleiman before his death.

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Bloomberg: Craig Wright Does Not Have Access to Bitcoin Fortune

Craig Wright said that he cannot comply with a court order to provide a list of all his early bitcoin addresses.

Craig Wright said that he cannot comply with a court order to provide a list of all his early bitcoin (BTC) addresses, Bloomberg reported on June 28 

The Australian computer scientist and self-proclaimed Satoshi Nakamoto said that he may not be able to access the coins at all.

As previously reported, the United States District Court of the Southern District of Florida issued an order on May 3 requiring Wright to produce a list of his public bitcoin addresses. Wright, however, failed to disclose his bitcoin holdings per court order.

The order was part of an ongoing case against Wright that was filed by the estate of David Kleiman. Kleiman was a cyber-security expert, whom many believe to have been one of the first developers behind bitcoin and blockchain technology.

Kleiman’s estate brought the case to court in February 2018, claiming that Wright stole hundreds of thousands of BTC worth over $5 billion after Kleiman’s death, claiming that Wright “forged a series of contracts that purported to transfer Dave’s assets to Craig and/or companies controlled by him. Craig backdated these contracts and forged Dave’s signature on them.”

Wright claims that he gave a key piece of information regarding the funds and wallets to Kleiman before his death, making it difficult to find the digital wallets or the funds they purportedly hold.

Wright maintains that he was the mysterious creator of bitcoin, going so far as to file U.S. copyright registrations for the bitcoin white paper.

Wright stated that he decided to stop working on bitcoin in 2010, adding that “I brought in Dave because he was a friend and he knew who I was and he was a forensic expert and I wanted to wipe everything I had to do with bitcoin from the public record.”

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Craig Wright Failed to Disclose Bitcoin Holdings in Court Case, Says Lawyer

Craig Wright has failed to disclose his bitcoin holdings in a high profile court case, says a plaintiff’s legal counsel.

The legal counsel for a plaintiff in a bitcoin (BTC) theft case involving Australian computer scientist Craig Wright, said that Wright — the defendant — failed to disclose his bitcoin holdings per court order. Devin Freedman of law firm Boies Schiller Flexner made his statements in a tweet on June 21.

As Cointelegraph previously reported, in May a United States court ordered Wright to produce a list of his public bitcoin addresses as of Dec. 31, 2013. Freedman declared that, since he has not complied, “he remains under an order to show cause why [Judge Florina] Reinhart shouldn’t issue sanctions” and order him to appear before Judge Beth Bloom and “explain why he shouldn’t be held in contempt.”

The order is part of an ongoing case against Wright — who self claims to be bitcoin creator Satoshi Nakamoto — that was filed by the estate of David Kleiman.

David Kleiman was a cyber-security expert and computer scientist, whom many believe  to have been one of the first developers behind bitcoin and its underlying blockchain technology.

Kleinman’s estate brought the case to court in February 2018, claiming that Wright stole hundreds of thousands of BTC worth over $5 billion following Kleiman’s death. The estate claims that Kleiman’s friends and family were unaware of the wealth he had accumulated and that Wright “forged a series of contracts that purported to transfer Dave’s assets to Craig and/or companies controlled by him. Craig backdated these contracts and forged Dave’s signature on them.”

Earlier this month, Wright was ordered to appear personally at mediation to address the accusations against him, after having requested permission to appear by video conference, arguing that physically attending the courtroom would have caused him “unjustifiable hardship.”

In May, Wright filed a copyright claim with the U.S. Patent and Trademark Office to a part of bitcoin’s code and its white paper, but its legal weight is disputed.

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US CFTC Brings Action Against $147 Million Bitcoin Investment Scheme

The U.S. CFTC has filed a complaint against an alleged $147 million bitcoin scam scheme, Control-Finance Limited.

The United States Commodity Futures Trading Commission (CFTC) launched action against a reportedly fraudulent $147 million bitcoin (BTC) scheme, fintech news outlet FinanceFeeds reports June 18.

On June 17, the regulator reportedly filed a complaint with the New York Southern District Court against now-defunct United Kingdom-based entity Control-Finance Ltd, which reportedly defrauded more than 1,000 investors to launder at least 22,858 bitcoin.

The CFTC also brings actions against the entity’s head, Benjamin Reynolds, stating that Control-Finance and Reynolds “exploited public enthusiasm for Bitcoin” from May 1, 2017, to October 31, 2017. The action seeks civil monetary penalties, including “permanent trading and registration bans, restitution, and disgorgement,” the report notes.

Citing documents by the CFTC, FinanceFeeds reported that Control-Finance was soliciting investors to buy their bitcoin with cash and deposit it with the firm, as they claimed to guarantee daily trading profits on the deposits through employed professional cryptocurrency traders. The alleged scammers were further sending portions of new clients’ BTC deposits to other customers, misrepresenting those as actual profits generated from crypto trading.

According to the report, Control-Finance suddenly took down its website on or around September 10, 2017, suspending payments to clients, as well as deleting advertising content from its profiles on social media including Facebook, YouTube and Twitter. Claiming that the firm would reimburse customers by late October or November 2017, the allegedly fraudulent entity reportedly diverted laundered bitcoin using crypto wallet service CoinPayments.

Recently, the British Financial Conduct Authority (FCA) issued a warning against a fraudulent firm posing as the Swiss Investment Corporation, an FCA-authorized firm offering crypto investments. At the time, the regulator also reported on another fraudulent entity that is a clone of global investment bank Goldman Sachs.

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Santander Loses Appeal Against Brazilian Crypto Exchange, Fine Upheld

Spanish bank Santander has lost an appeal in a Brazilian court regarding the closure of a cryptocurrency’s account.

Major Spanish bank Santander has been denied an appeal regarding a decision by the Court of Justice of the State of São Paulo in a case against crypto exchange Mercado Bitcoin, Cointelegraph Brazil reports on June 17.

Santander was sued by the Brazilian exchange Mercado Bitcoin in 2018, after the bank purportedly closed the exchange’s account at its sole discretion. The bank, which has branches in Latin America, cited concerns over the origin of the account’s fund due to the nature of the crypto exchange’s activities.

Over 1 million reals (around $350,000) were locked, but the court subsequently ordered Santander to free the funds. Additionally, the bank must pay a monthly fine equal to 1% interest for the funds that were locked; this reportedly comes out to over 200,000 reals ($51,000).

Today’s decision rejected an additional appeal, and reconfirmed the previous ruling that compels Santander to return the funds and pay the fine.

Cryptocurrency exchanges have previously run into problems with banks closing their accounts, as some financial institutions find the cryptocurrency industry to be too unregulated and/or volatile to conduct business with firms in the space.

Last May, Finnish cryptocurrency wallet service Prasos Oy said that it was one step from being shut down, as most Finnish banks would no longer do business with them. Banks were reportedly concerned that doing business with Prasos Oy would run afoul of current Finnish anti-money laundering laws.

Last April, three Chilean crypto exchanges filed complaints with an appeals court over their accounts being frozen by banks in March. The banks Itau Corpbanca and Scotiabank had locked the accounts for the exchanges BUDA and CryptoMKT, and the public bank Banco del Estado de Chile had frozen Orionx’s account as well as BUDA’s and CryptoMKT’s.

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Craig Wright Ordered to Personally Appear at Bitcoin Theft Mediation

A judge has ruled that a personal appearance by Craig Wright at mediation will promote “meaningful participation.”

Craig Wright has been ordered to appear personally at mediation to address allegations that he stole 1.1 million bitcoin (BTC) from Dave Kleiman, court documents filed on June 10 show.

The Australian entrepreneur had requested permission to appear by videoconference, arguing that physically attending the courtroom would have caused him “unjustifiable hardship.”

However, his motion was opposed by the plaintiffs, who argued that the discovery already performed so far in the case delivered “sufficient information to fairly evaluate the claims at issue.” The court sided with the plaintiffs, with Judge Beth Bloom ruling:

“Personal appearance by the parties will promote meaningful participation at mediation.”

As a result, Wright has now been ordered to attend the next mediation session on June 18.

He is accused of stealing bitcoin from the estate of Kleiman, a crypto developer who passed away in 2013. Kleiman’s family allege that up to 1.1 million BTC was taken, which would be worth just shy of $9 billion at press time.

Wright has made repeated requests to have the lawsuit dismissed, but back in December, Judge Bloom ordered that the case should proceed.

Last month, Wright filed United States copyright registrations for the Bitcoin white paper authored by Satoshi Nakamoto, attracting controversy from commentators.

Although the computer scientist has long claimed to be Nakamoto, a subsequent report by the Financial Times suggested that Wright’s registrations do not mean his claims are recognized by the U.S. government.

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Ex-Employee Sues Zcash Operator in $2 Million Lawsuit Over Unpaid Stocks

Simon Liu variously alleges nonpayment and the lack of legal clearance for Zerocoin to offer common stocks.

The company behind cryptocurrency zcash (ZEC) is facing a $2 million legal challenge over unpaid shares, documents originally filed on May 29 confirm.

According to the complaint, which appeared at the Superior Court of California for the County of San Francisco, an ex-employee brought the charges after he did not receive $15,000 of stock in 2016.

Simon Liu worked for Zerocoin, now known as the Electric Coin Company, and additionally claims the company was not legally permitted to offer the equity.

“Plaintiff is informed and believes, and thereon alleges, that Zerocoin did not have the authorization to issue common stock to employees in 2016, and that Defendants, and each of them, were aware that Zerocoin did not have such an authorization,” the document reads.

Requests to view company documents were also denied, Liu says.

Neither Zerocoin nor CEO Zooko Wilcox had issued a public statement about the debacle as of press time.

The name change from Zerocoin to the Electric Coin Company had occurred in February, the impetus being to avoid confusion between Zcash and the nonprofit Zcash Foundation.

Zcash currently trades around $79 and has an overall market cap of just under $600 million. Its all-time high in January 2018 saw a single coin change hands at closer to $900.

A dedicated ASIC mining device for Zcash and other Equishash coins, developed by cryptocurrency mining giant Bitmain, appeared in March this year.

In April in a separate case, a former employee of crypto exchange Kraken has also sued the exchange for $900,000, claiming a failure to receive a reportedly promised commission and stock options.

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US SEC Adds Fraud to List of Charges Against ‘Crypto’ Firm Longfin

The U.S. SEC has filed a complaint against alleged cryptocurrency firm Longfin Corp. and CEO Venkata S. Meenavalli over new discoveries of alleged fraud.

The United States Securities and Exchange Commission (SEC) has filed fraud charges against supposed cryptocurrency firm Longfin Corp. and its CEO Venkata S. Meenavalli, according to a press release on June 5.

Longfin saw a massive jump in its share price in 2017 when it claimed that it had redirected its business model toward blockchain technology.

The associate director of the Division of Enforcement, Anita B. Bandy, summarized the allegations as such:

“In our complaint against Longfin and Meenavalli and our amended complaint against Altahawi, we allege a multi-pronged fraud involving fake revenue, misrepresentations to the SEC, and false statements to Nasdaq.”

The SEC filed its complaint in the federal district court of Manhattan, New York claiming that Longfin fabricated 90% of its revenue and sold over 400,000 shares of Longfin, that it did not have the funds to back, in a scheme to secure its spot on the Nasdaq.

The complaint also reportedly states that the SEC granted Longfin’s Regulation A+ offering based on the supposition that the company was principally managed and run out of the U.S., when in actuality the company’s operations, assets and management were all offshore.

Consultant Andy Altahawi stands accused in the SEC complaint of reporting the fraudulent number of qualifying shareholders and shares sold in Longfin’s public offering to Nasdaq. The U.S. Attorney’s Office for the District of New Jersey also announced on June 5 that it is pursuing criminal charges against CEO Meenavalli.

As previously reported by Cointelegraph, the SEC previously charged Longfin and CEO Meenavalli with securities fraud and froze over $27 million in Longfin trading profits in April 2018.

The SEC then accused Meenavalli of insider trading in the amount of more than two million unregistered, restricted shares to consultant Amro Altahawi, as well as five-figure quantities of restricted shares to individuals Dorababu Penumarthi and Suresh Tammineedi.

The commission alleged that the defendants had fraudulently boosted their stock price by releasing a misleading statement about acquiring an alleged crypto business, and quickly sold their shares at the pumped-up price. The SEC reportedly pursued penalties including disgorgement via Section 5 of the Securities Act of 1933, pertaining to ill-gotten profits.