Authorities Arrest the Founder of Cryptocurrency Exchange, Bitfunder

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Recently, hackers made their way into the administration panel of one of the renowned cryptocurrency exchange websites, compromising user accounts and escaping with a huge sum of cryptocurrency worth today $70m. Jon Montroll, 37, the founder of the cryptocurrency exchange has been arrested and charged for refusing to take responsibility for the loss. It is unclear what their website terms and conditions states, but authorities made this decision after thorough investigation and came to the conclusion that the founder has no legal right to reject taking responsibility for the loss of his company.

“As alleged, the defendant repeatedly lied during sworn testimony and misled SEC staff to avoid taking personal responsibility for the loss of thousands of his customers’ Bitcoins,” said Geoffrey Berman, the Manhattan U.S Attorney.

The Charge

Montroll faces two strong charges from two different regulatory bodies. The U.S. Securities and Exchange Commission filed a lawsuit against him accusing him of running exchange securities that are not recognized by the law. According to a report, the exchange securities were not registered, and have a high risk of making the users lose their assets. It was on that same day that the Manhattan prosecutors charged him for failing to take responsibility for the huge loss of users. This has sent shivers down the spines of exchange website founders who are operating outside the law.

According to the information received from the prosecutors, Montroll operated two strong websites that dealt in cryptocurrency. He was the operator of WeExchange Australia and Bitfunder. Bitfunder acted as a medium for selling virtual shares of business entities in exchange for bitcoins. The WeExchange Australia served as a Bitcoin depository and an exchange for the cryptocurrencies. Hackers in 2013 took advantage of the loopholes in their system to steal 6000 Bitcoin from the website. Information says that Montroll has not been able to raise enough from these two websites again to cover up the debt he owes his users.

To avoid the pressure from users, he secretly transferred his own Bitcoin to the website in order to prevent any suspicion from the users. This actually affected the operations of Bitfunder causing it to collapse in 2013. Not being enough, he produced a fake screenshot of the available fund to the SEC as he sought help elsewhere. At the time of the incident, the 6000 Bitcoin was worth $775, 075, almost $70 Million today. He allowed three days to elapse, and hid under the username “Ukyo” to make inquiries in a live chat on how to trace a stolen Bitcoin, said the prosecutor.

He was charged with perjury and obstruction of justice and was arrested in his home in Saginaw, Texas. After the arrest, numerous attempts were made to reach his lawyer for a comment on the case but he remained silent. Bitcoin’s increasing price has led to the operations of hackers and ransomware attacks. Bitcoin price is said to be directly related to the number of recorded ransomware cases.

Cryptocurrency Exchange Websites Are Sitting Ducks to Ransomware Attacks

The recent rate at which hackers have made exchange websites a target is alarming. Recently, an Italian based exchange website called Bitgrail was hacked and 17 million units of Nano were stolen. This was published by the website short time after the site was hacked. “Internal checks revealed unauthorized transactions which led to a 17 million Nano shortfall, an amount forming part of the wallet managed by Bitgrail,” the site post stated. “Today a charge about those fraudulent activities has been submitted to the competent authorities and now they are under police investigation.”

This is one of the ransomware attacks launched on any cryptocurrency exchange this year. The extent to which these platforms remain sitting duck to cyber attack was revealed when another Japan-based cryptocurrency exchange website called Coincheck was hacked and $500 Million of virtual cash was taken away. $64 million was also stolen from NiceHash in the late last year putting more pressure on the existing ones to take a second look at their security systems. This has increased the insecurity of users who have funds on the various exchange platforms, forcing them to consider other options.

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