In a strange turn of events, a 37-year-old man from Saginaw in Texas could face 20 years in prison for his part in a crypto crime saga which saw him trapped in a web of lies as both perpetrator and victim. Jon E. Montroll admitted in a New York court this week to lying to investigators about a hack attack on one of his crypto platforms so he could cover up his own earlier theft of customers’ deposits.
At a hearing before Judge James L. Cott, Montroll pleaded guilty to the charges of securities fraud and obstruction of justice brought against him. These were related to his two now defunct cryptocurrency operations, WeExchange Australia PTY Ltd coin depository and exchange, and a virtual share platform BitFunder.
Montroll Starts the Crypto Crime Ball Rolling
Prosecutors outlined the spiral of events that occurred during 2012 and 2013, revealing his role as both crypto fraudster and hacking victim in crypto crimes. These collectively involved many thousands of dollars in coins back at a time when Bitcoin’s value was a lot less than it is now.
It all started with Montroll converting some of his customers’ coins into cash for his own use on items like groceries and travel. Then the tide turned. In 2013, hackers stole Bitcoins from his Bitfunder platform after gaining access through a programming code weakness. They got away with about 6,000 Bitcoins from the platform, a taking worth over $775,000 back then, but which would now fetch about $46 million at current rates. And Montroll was left unable to cover the money he had already cashed in for himself from customer deposits.
Trying to Deal with Fallout
Montroll did not stop there. Trying to recoup some of the money he had already taken from his customers, he didn’t tell platform users about the hacking event, and continued to push BitFunder as a flourishing operation. This meant be was able to raise a further 978 coins, according to the prosecutors. And when the U.S. Securities and Exchange Commission started looking into the hack, Montroll lied to them under oath about when it happened, and provided investigators with misleading screenshots about how many Bitcoin were still available to users of BitFunder.
Prosecutors also cited that Montroll had failed to meet SEC regulations that require registration of digital securities exchanges like Bitfunder. He had also lied to cryptocurrency investors in promising them daily interest on their investments, as well as the ability to reclaim them at any time, if they transferred them to the Ukyo.Loan security.