Bitfunder operator Jon Montroll has been sentenced to 14 months in prison and three years of supervised release, Finance Feeds writes.
In 2012, Montroll became the operator of two interconnected services; WeExchange (the bitcoin depository) and Bitfunder.com (the trading platform). Users needed accounts on both platforms.
However, Montroll allegedly used funds stored in users WeExchange wallets for his personal expenses. From mid-July 2013, he also started offering a security that he described to investors as "sort of round-about investment” in BitFunder and WeExchange, while also claiming it was for “a personal loan." In addition, Montroll did not tell users about a hack on the exchange that same month. To try to hide the losses, he then transferred a large number of bitcoins into the WeExchange system.
Montroll pleaded guilty to securities fraud and the obstruction of justice, after originally claiming to the SEC that he had found the code-vulnerability and prevented the theft.