SEC Hits BitFunder, Founder with Fraud Charges

The US SEC has charged a defunct crypto exchange and its founder with fraud, claiming the operator didn’t notify the public about a cyber-attack that cost it 6,000 Bitcoin.

The US Securities and Exchange Commission (SEC) has charged collapsed cryptocurrency exchange BitFunder and its founder Jon Montroll with running an “unregistered securities exchange” and defrauding clients, according to a press release published on Wednesday. The regulator also claims that the exchange failed to inform the public of a cyber-attack that led to the theft of over 6,000 Bitcoin.

BitFunder emerged in 2012 and was shut down only a year later. Soon, other similar services folded: Global Bitcoin Stock Exchange ceased activity in October 2012, and closed in October 2013.

The SEC accusation makes it unclear whether Bitcoin and other cryptocurrencies should be considered securities.

Marc Berger, head of the SEC’s New York division, said:

“We allege that BitFunder operated unlawfully as an unregistered securities exchange.”

“Platforms that engage in the activity of a national securities exchange, regardless of whether that activity involves digital assets, tokens, or coins, must register with the SEC or operate pursuant to an exemption,” he added.

The agency has also charged the exchange and its founder with infringement of the anti-fraud and registration provisions of the federal securities laws. The case aims to secure permanent injunctions and disgorgement, as well as interest and penalties.

Lara Mehraban, a director at the SEC’s New York division, noted that the commission would carry on monitoring activities in the blockchain space and make sure that parties who engage in fraud are penalized accordingly.

As for Montroll, the US Attorney’s Office for the Southern District of New York has charged him in a parallel complaint with “perjury and obstruction of justice during the SEC’s investigation.”

In recent months, the SEC has become more active in halting trades or initial coin offerings. Last week, the regulator suspended the trade of three companies, which are being investigated for some crypto-related acquisitions that might not be legitimate.

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