The operator of two defunct cryptocurrency services pleaded guilty to charges that he stole his customers’ deposits and lied to investigators after hackers stole thousands of bitcoins from the services.
Jon E. Montroll, 37, of Saginaw, Texas, faces as long as 20 years in prison for securities fraud and obstruction of justice after entering his plea before U.S. Magistrate Judge James L. Cott in New York Monday. Montroll operated two online services – WeExchange, which served as a bitcoin depository and currency exchange service, and BitFunder, which enabled the purchase and trading of virtual shares of business entities that listed on the platform.
Prosecutors said Montroll converted a portion of bitcoins belonging to WeExchange customers into U.S. dollars and spent them on travel and groceries, among other personal expenses. Then , during the summer of 2013, hackers exploited a weakness in BitFunder’s programming code to steal about 6,000 Bitcoins – leaving Montroll without enough to cover what he owed to users.
Montroll didn’t tell users of either platform about the attack, and continued to promote BitFunder as successful, allowing him to raise another 978 bitcoin, prosecutors said. While the U.S. Securities and Exchange Commission was probing the hack, Montroll provided the agency with a fake screenshot showing the number of bitcoin available to BitFunder users, and lied to investigators while giving sworn testimony about the timing of the attack.