BitFunder and WeExchange Bitcoin Scams Totalling $9 Million Affected Roughly 250 Investors
Have you ever heard of Jon Montroll? The man was arrested in February 2018 in connection to a scam which happened in 2013. Montroll was the founder of BitFunder, the platform in which the theft happened, and another platform called WeExchange.
It all started more than five years ago when his platform has hacked and lost over 6,000 BTC. At the time, he tried to cover the crime and even lied to the authorities in order to never let the investors know that their money was not there anymore.
At the moment, his lawyers are trying to get him out on probation, but the prosecutors want the man to spend at least more 27 months in jail for his crimes.
Despite the amount of Bitcoin being so high at the time, the tokens were worth only $94 USD at the time of the theft, so the whole range of the financial loss was around $212,000 USD at the time.
However, the cost of paying these victims today in Bitcoin and not USD would be over $9 million USD with all the corrections in place. This way, the hack was not so millionaire at the time, but it has become a very valuable one over time.
The original case of the hack was a very sad affair. Montroll panicked as soon as the money was stolen and decided that he would fool people into believing that everything was still running smoothly. To do it, he even used some of his Bitcoin reserves to cover the losses.
Sometime after the attack, the U. S. Securities and Exchange Commission (SEC) started to investigate the case. At this point, the owner of the unregulated exchange thought it was a brilliant idea to lie to the regulators.
He told them that the company was able to deal with the attacks and never called the authorities to inform anything. He basically did the same the executives of Mt Gox have done in the situation.
After the attack, he sort of started a Ponzi scheme, as he simply did not have the money anymore. Because of this, he was using the money of the new users to pay the ones who withdrew the money.
He was able to keep things afloat for quite some time at first, but after some time the users started to experience difficulties on order to withdraw and people eventually discovered that there was simply no more money to be withdrawn from the company’s wallets. Because of this, the company was shut down on November 14, 2013.
In any case, even without the hack and the lie, Montroll would probably get in trouble eventually. His exchange was not licensed and he issued “Ukyo Notes”, which were unregistered securities from a company called Ukyo, a clear breach of the securities law.
Now, he is being accused by the SEC of misusing the customer’s funds and for the breach in the securities law, as well as for lying to investigators.
The Police Still Struggled To Find The Former Clients
One of the main problems left in this case at the moment is the fact that the police and the local government were only able to identify 230 out of a total of 256 investors who lost their money.
In order to pay for the restitution of the money which was stolen from the investors, the authorities need all their names, or they will simply not be able to give the money to these 26 investors who have remained elusive so far. Apparently, their names and emails were not within the information that the police nor the government currently has about the case.
These identified victims should receive a total of 2,258 BTC back from the owner of the business. This means that Montroll owes around $9 million USD to these victims. Will they be paid? We will have to see the development of this case to know about that.