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Shuttered Bitcoin Exchange operator arrested in US

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Operator of a shuttered bitcoin exchange allegedly lied to the SEC to avoid getting saddled with the responsibility of a $70 million cryptocurrency theft. Consequently, he was arrested on Wednesday.

Charges against BitFunder founder Jon Montroll were announced the very day the SEC initiated a lawsuit against him for running an unregistered securities exchange and knowingly defrauding the users.

“As alleged, the defendant repeatedly lied during sworn testimony and misled SEC staff to avoid taking personal responsibility for the loss of thousands of his customers’ bitcoins,” Manhattan U.S. Attorney Geoffrey Berman said in a statement.

Montroll was arrested on the charges of perjury and obstruction of justice in his home state, Texas. His lawyer has not responded to request to comment.

Montroll operated WeExchange, a bitcoin depository and exchange service. And BitFunder.com allowed for trading of virtual shared of companies for bitcoins.

In 2013, hackers exploited the BitFunder programmer code to credit themselves profits they hadn’t accrued. They managed to withdraw 6000 bitcoins from WeExchange as a result.

As a consequence of the hack Montroll fell short of bitcoins that he owed his users, say prosecutors. However, during a SEC probe, Montroll had denied any success of the hackers actually exploiting the weakness. Prosecutors further alleged that Montroll had produced a misleading screenshot of the available bitcoins on BitFunder in October, 2013.

The prosecutors also say that three days after the hack, Montroll had sought help from other principal bitcoin exchanges to track the stolen bitcoins. He had further transferred his own bitcoins to cover up the theft.

The bitcoins stolen would be worth about $69.6 million according to current valuations.

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