On February 21, the U.S. Securities and Exchange Commission (SEC) brought charges against a former cryptocurrency exchange platform and its founder for violations of the registration and anti-fraud provisions of federal securities laws.
According to the SEC’s complaint, BitFunder and its founder Jon E. Montroll (1) unlawfully operated an unregistered securities exchange, (2) defrauded users of the exchange by misappropriating their bitcoins and by failing to disclose a cybersecurity breach which led to the theft of more than 6,000 bitcoins, (3) unlawfully sold unregistered securities that Montroll represented would be used for private investment purposes, and (4) misappropriated funds from the sale to pay personal and business expenses and to replenish bitcoins he had already misappropriated from BitFunder prior to the sale.
The enforcement action highlights yet again that exchange platforms, including those involving digital assets, tokens, or coins, must register with the SEC or operate pursuant to an exemption, and that the SEC continues to be interested in policing the cryptocurrency space in order to protect investors and ensure compliance with federal securities laws.
A copy of the SEC’s complaint is available here.
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