Jon E. Montroll Allegedly Lied Repeatedly to SEC Staff During Testimony to Conceal Substantial Customer Losses Due to a Software Exploit
Geoffrey S. Berman, the U.S. of A. Attorney for the Southern District of New York, as well as William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that JON E. MONTROLL, a/k/a “Ukyo” was taken into federal custody today for giving fake sworn testimony as well as fake documentation to the staff of the New York Regional Office of the Securities Exchange Commission (“SEC”). The accused is expected to live on presented this afternoon inwards U.S. District Court for the Northern District of Texas, earlier U.S. Magistrate Judge Jeffrey L. Cureton.
Manhattan U.S. Attorney Geoffrey S. Berman said: “SEC investigations rely on learning the total as well as accurate facts concerning fiscal markets as well as products. As alleged, the accused repeatedly lied during sworn testimony as well as misled SEC staff to avoid taking personal responsibleness for the loss of thousands of his customers’ bitcoins. These charges signify that nosotros volition exercise the total forcefulness of the federal criminal police push clit to protect the integrity of the SEC’s investigative process.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “As alleged, Montroll committed a serious offense when he lied to the SEC during sworn testimony. In an endeavor to encompass upwards the results of a hack that exploited weaknesses inwards the programming code of his company, he allegedly went to bang-up lengths to prove the residue of bitcoins available to BitFunder users inwards the WeExchange Wallet was sufficient to encompass the money owed to investors. It’s said that honesty is e'er the best policy – this is yet some other illustration inwards which this virtue holds true.”
According to the allegations inwards the Complaint filed today inwards Manhattan federal court:[1]
JON E. MONTROLL operated ii online bitcoin services: WeExchange Australia, Pty. Ltd. (“WeExchange”) as well as BitFunder.com (“BitFunder”). WeExchange functioned equally a bitcoin depository as well as currency telephone commutation service. BitFunder facilitated the buy as well as trading of virtual shares of employment concern entities that listed their virtual shares on the BitFunder platform.
During the summertime of 2013, i or to a greater extent than individuals (the “Hackers”) exploited a weakness inwards the BitFunder programming code to campaign BitFunder to credit the Hackers with profits they did not, inwards fact, earn (the “Exploit”). As a result, the Hackers were able to wrongfully withdraw from WeExchange exactly about 6,000 bitcoins, with the bulk of those coins existence wrongfully withdrawn betwixt July 28, 2013, as well as July 31, 2013. In today’s value, the wrongfully withdrawn bitcoin were worth to a greater extent than than $60 million. As a resultant of the Exploit, BitFunder as well as WeExchange lacked the bitcoins necessary to encompass what MONTROLL owed to users.
In Nov 2013, MONTROLL provided sworn testimony to the SEC’s New York Regional Office inwards connecter with their investigation into the Exploit as well as BitFunder’s activities. In that testimony, MONTROLL denied that the Exploit had been successful, testifying that, “When [the Hackers] went to withdraw, the arrangement stopped them because the amount was manifestly causing issues with the system.” MONTROLL after added that the software number “was corrected immediately, whenever the arrangement started having the problems, as well as I caught on to what was happening I’d order inside a few hours.”
MONTROLL likewise produced to the SEC a screenshot purportedly documenting, alongside other things, the total number of bitcoins available to BitFunder users inwards the WeExchange Wallet equally of Oct 13, 2013 (the “Balance Statement”). The Balance Statement reflected “6,679.78 BTC” on mitt equally of that date. In discussing the Balance Statement inwards his sworn testimony, MONTROLL explained that it represented “the collective puddle of funds held for users on BitFunder. The collective puddle of BTC held for users on BitFunder – users who transfer bitcoins to BitFunder, this is the total amount that’s existence held past times BitFunder of those users.”
Contemporaneous digital evidence, including chat logs as well as transaction data, revealed that the Balance Statement was a misleading fabrication. Three days into the Exploit, MONTROLL had participated inwards an cyberspace relay chat with some other someone (“Person-1”) inwards which he sought assist inwards tracking downward “Stolen coins.” When that did non work, MONTROLL transferred some of his ain bitcoin holdings into WeExchange to conceal the losses. The Exploit, however, continued. By the fourth dimension of the Balance Statement, WeExchange genuinely held thousands of bitcoins less than MONTROLL had asserted through the fake Balance Statement.
When confronted with that evidence during subsequent testimony, MONTROLL lied to SEC staff again. While MONTROLL admitted that the Balance Statement was the production of his manual intervention inwards the WeExchange system, he claimed to receive got discovered the success of the Exploit alone after the SEC had asked him close it during his showtime 24-hour interval of testimony as well as to receive got no noesis of the chat with Person-1.
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MONTROLL, 37, of Saginaw, Texas, is charged with ii counts of perjury as well as i count of obstacle of justice. The perjury counts each comport a maximum penalisation of v years inwards prison. The obstacle of justice count carries a maximum penalisation of xx years inwards prison. The maximum potential sentences inwards this illustration are prescribed past times Congress as well as are provided hither for informational purposes only, equally whatsoever sentencing of the accused volition live on determined past times the judge.
Mr. Berman praised the outstanding piece of work of the FBI. He likewise thanked the SEC, which has filed civil charges against MONTROLL inwards a dissever action.
The prosecution of this illustration is existence overseen past times the Office’s Securities as well as Commodities Fraud Task Force. Assistant U.S. Attorney Andrew Thomas is inwards accuse of the case.
The charges contained inwards the Complaint are exactly accusations, as well as the accused is presumed innocent unless as well as until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, as well as the description of the Complaint laid upwards forth herein, works life alone allegations, as well as every fact described should live on treated equally an allegation.
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