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Bitcoin Trader Pleads Guilty to Securities Fraud, Faces 20 Years in Prison

Joe E. Montroll of Saginaw Texas is facing up to 20 years in prison after admitting to lying to investigators about his role in the theft of Bitcoins deposited by customers of his platform. 2018 has seen a raft of arrests and convictions in the cryptocurrency space as law enforcement, and financial regulators work hard to sanitize the industry.

Platform Owner Stole Bitcoin Belonging to Investors

Before his arrest, Montroll operated a pair of Bitcoin and cryptocurrency business – WeExchange and BitFunder. WeExchange was a Bitcoin depository and currency trading service while BitFunder was a platform that enabled customers to buy and trade tokenized shares listed on the service.

When the going was good, Montroll allegedly took illegal possession of customer Bitcoin deposits to fund his lavish lifestyle. Prosecutors on the case say he converted some of the Bitcoins invested by customers into U.S. dollars. He then spent the money on exotic vacations, grocery shopping as well as various personal expenses.

Another Mt. Gox-esque Swindle

It all went bad for Montroll when BitFunder suffered a cyber-attack in 2013. Suspected hackers took advantage of loopholes in the platform’s security to siphon more than 6,000 BTC. Montroll was suddenly in a position where he didn’t have enough to cover the stolen funds just like with Mt. Gox, the popular defunct Bitcoin exchange.

Instead of coming out clean to his customers, Montroll perpetrated a ruse that portrayed the platform as still being solvent. He continued to promote BitFunder and was able to raise an additional 978 BTC.

During the hack investigation, Montroll is accused of sending fake screenshots to investigators showing non-existent Bitcoin holdings. By lying to investigators, Montroll put himself at risk of obstruction charges being brought up against him.

On Monday, Montroll pleaded guilty before U.S. Magistrate Judge James L. Cott on charges of securities fraud and obstruction of justice. He faces up to 20 years in prison.

What do you think about Montroll’s fate? Let us know your thoughts in the comment section below.


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Crypto Stock Exchange Operator Pleads Guilty to Fraud

The man behind two now-defunct cryptocurrency investment sites has pled guilty to securities fraud and obstruction of justice charges.

The U.S. Attorney for the Southern District of New York announced the guilty plea on Monday, coming days after it was reported that Montroll was close to a deal with prosecutors. Jon Montroll was arrested back in February by U.S. authorities, as CoinDesk reported at the time, in connection with securities investment platform BitFunder and crypto exchange site WeExchange.

Montroll was accused of running an unregistered securities exchange, as well as providing info to investigators that was described as “misleading.” Montroll also allegedly “converted a portion of WeExchange users’ bitcoins to his personal use without the users’ knowledge or consent,” according to a statement published Monday.

He notably was accused of lying about the number of bitcoins available to BitFunder and WeExchange users after the latter was hacked, as well as committing perjury while testifying to the U.S. Securities and Exchange Commission (SEC).

WeExchange lost around 6,000 bitcoins at the time of the hack, which left the platform insolvent, as previously reported.

Manhattan U.S. Attorney Geoffrey Berman said in a statement Monday:

“As he admitted today, Jon Montroll deceived his investors and then attempted to deceive the SEC. He repeatedly lied during sworn testimony and misled SEC staff to avoid taking responsibility for the loss of thousands of his customers’ bitcoins.”

Though the case was originally brought by the SEC, the FBI and Southern District of New York Attorney’s office prosecuted Montroll under criminal charges. U.S. District Judge Richard Berman will sentence Montroll at an undetermined future date.

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North Carolina Orders Crypto Mining Firm to Halt Share Sale

North Carolina’s government has sent a cease-and-desist order to a cryptocurrency company they say is selling unregistered securities in the U.S. state.

The North Carolina Secretary of State Securities Division issued a temporary cease-and-desist order on March 2 against the European project PowerMining Pool. The move comes just under two months after that department issued a cease-and-desist order that faulted the now-defunct investment scheme BitConnect for failing to register its offerings as securities.

Documents released by the state allege that PMP utilized problematic sales tactics. They also said the local PMP campaign violated the state’s Securities Act with business practices that “threaten immediate and irreparable public harm.”

PMP sells “shares” for bitcoin, claiming to mine seven different cryptocurrencies on behalf of its shareholders. The startup’s site makes claims about shareholders reaping “totally passive” profits just hours after setting up an account and depositing bitcoin. Akin to other investment schemes, people are encouraged to solicit others and are promised additional rewards as a bonus.

Notably, according to the order, PMP affiliates in North Carolina used a range of methods to market the sale, including social media platforms like YouTube, Facebook, Instagram and even local classified ads.

That said, it’s reportedly unclear if some of the names attached to the project are real people.

“The Securities Division has been unable to confirm whether Andrew Conti and Mike Conti, of central Europe, are real people,” the order also states.

The move appears to be part of a broader effort to curb unlawful cryptocurrency investment schemes. As CoinDesk previously reported, several similar orders were issued in Texas and New Jersey over the past few months.

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