A founder of a defunct bitcoin stock exchange has been arrested after the U.S. Securities and Exchange Commission filed fraud charges against him Wednesday.
Jon E. Montroll, the operator of a bitcoin stock exchange called BitFunder that operated between 2012 and 2013, is alleged to have defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on the platform that led to the theft of more than 6,000 bitcoins.
The SEC filing alleges that in addition to the fraud allegations, Montroll operated an unregistered securities exchange and made false and misleading statements in connection with an unregistered offering of securities.
“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,” SEC director Marc Berger said in a statement.
The history of BitFunder, which was obscure even back in bitcoin’s early days, is clouded with time. A snapshot from April 2013 shows a site that pitches itself as a “bitcoin fund raiser and trader.” The site offered services such as share trading and a way for users to “buy a dividend paying asset share” with dividend payouts that “are automatically credited to your account and can be withdrawn at ANY time.”
According to Coindesk, BitFunder acted as a kind of companion service to the cryptocurrency exchange WeExchange before it closed in late 2013. WeExchange itself was another dubious bitcoin company that was also accused of fraud by users in 2014.