[Weexchange issue] The fall of Ukyo III - Updates and references

[Pompobit]

unfortunately that is true, we have no hope to get back our funds.

We can just to hope that Montroll will not enjoy them

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[digit]

BitFunder Operator 'Close to' Plea Bargain in SEC Fraud Case - https://www.coindesk.com/bitfunder-operator-close-to-plea-bargain-in-sec-fraud-case/

The operator of defunct bitcoin investment platform BitFunder, Jon Montroll, is reportedly seeking a plea bargain over fraud and other charges laid against him by the U.S. Securities Exchange Commission (SEC).

FinanceFeeds indicated Thursday that, according to a document submitted by Montroll's legal counsel, "a plea agreement agreed upon in principle and expected to be finalized and entered by July 23" has accelerated efforts to reach a final court resolution.

Back in February, Montroll was hit with a number of charges for operating what the SEC said was an "unregistered securities exchange" and allegedly using the platform to defraud users of their cryptocurrency.

Separately, Montroll is accused of perjury and obstruction of justice over his failure to report a hack of his second business, WeExchange, in 2013. The breach ultimately saw roughly 6,000 bitcoins stolen – now worth some $68.7 million. The accused reportedly transferred some of his own cryptocurrency holdings to the exchange in an attempt to conceal the losses.

According to the New York Attorneys Office, William F. Sweeney Jr., FBI assistant director-in-charge, commented:

"As alleged, Montroll committed a serious crime when he lied to the SEC during sworn testimony.  In an attempt to cover up the results of a hack that exploited weaknesses in the programming code of his company, he allegedly went to great lengths to prove the balance of bitcoins available to BitFunder users in the WeExchange Wallet was sufficient to cover the money owed to investors. It's said that honesty is always the best policy – this is yet another case in which this virtue holds true."

With the anticipated plea deal set to be finalized next week, negotiations between Montroll and the SEC are expected to reach a conclusion in the next three months, if not earlier.

Jon Montroll, Bitfunder say they are close to plea agreement with US authorities - https://financefeeds.com/jon-montroll-bitfunder-say-close-plea-agreement-us-authorities/

As a result of the anticipated plea in the criminal case, negotiations with the SEC to resolve the civil case have accelerated, the defendants in a Bitcoin fraud case say.

There is an update on the US authorities’ action against Jon E. Montroll and Bitfunder, accused of operating an unregistered securities exchange and defrauding users of that exchange.

On July 18, 2018, counsel for Montroll and Bitfunder submitted a status report with the New York Southern District Court. The document, seen by FinanceFeeds, states that “the defendants’ efforts to resolve the criminal case related to this proceeding, United States v. Montroll, 18 Mag. 1372, have culminated in a plea agreement agreed upon in principle and expected to be finalized and entered by July 23”. Put otherwise, the plea is expected early next week.

As a result of the anticipated plea in the criminal case, negotiations with the Securities and Exchange Commission (SEC) to resolve the civil case have accelerated, the counsel for the defendants says. Montroll and Bitfunder currently expect to resolve the civil case by agreement as well. The parties expect it will take 2-3 months to achieve a final resolution by agreement.

Let’s recall that in February this year, the SEC charged Bitfunder, a former Bitcoin-denominated platform, and its founder – Jon Montroll, with operating an unregistered securities exchange and defrauding users of that exchange. The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities.

In its complaint, the SEC alleges that BitFunder was an unregistered online securities exchange and that Montroll defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins.The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well.

The SEC’s complaint charges BitFunder and Montroll with violations of the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctions and disgorgement plus interest and penalties.

In a parallel criminal case, the U.S. Attorney’s Office for the Southern District of New York filed a complaint against Montroll for perjury and obstruction of justice during the SEC’s investigation.

[Pompobit]

thank you digit, first post updated

[SebastianJu]

No info regarding the coins, they are still lost or is there any info pointing to any coins recovered?

[SebastianJu]

No info regarding the coins, they are still lost or is there any info pointing to any coins recovered?

Would like to ask here as well if someone is still in contact with Jon after the last things that happened. Please contact me.

[digit]

NY Court postpones sentencing of BitFunder operator Jon Montroll (November 20, 2018) - https://financefeeds.com/ny-court-postpones-sentencing-bitfunder-operator-jon-montroll/

Judge Richard M. Berman of the New York Southern District Court has adjourned the sentencing to January 24, 2019.


Jon Montroll, operator of purported Bitcoin platform BitFunder, has obtained the Court’s approval of his request to have his sentencing postponed again.

The latest document filings with the New York Southern District Court show Judge Richard M. Berman has granted the defendant’s request. This means that sentencing is adjourned to January 24, 2019.

Montroll has asked for additional time to generate funds that are set to allow him to make a substantial payment towards his agreed-upon restitution obligation prior to sentencing. The defense counsel has explained that Montroll owns and operates two nursing homes in north Texas and expects to receive in December and January reimbursement for services rendered that will allow him to satisfy part of his restitution in advance of sentencing.

Montroll, a/k/a “Ukyo,” operated two online bitcoin services: WeExchange Australia, Pty. Ltd. (WeExchange) and BitFunder.com (BitFunder). WeExchange functioned as a bitcoin depository and currency exchange service. BitFunder facilitated the purchase and trading of virtual shares of business entities that listed their virtual shares on the BitFunder platform.

Between the launch of Bitfunder, in or about December 2012, and at least in or about July 2013, Montroll converted a portion of WeExchange users’ bitcoins to his personal use without the users’ knowledge or consent. He exchanged bitcoins taken from WeExchange into US dollars, then spent those funds on personal expenses, such as travel.

In addition, since July 18, 2013, Montroll has promoted a security referred to as “Ukyo.Loan.” He encouraged investors to “think of [Ukyo.Loan] as a sort of round-about investment” in BitFunder and WeExchange and, at the same time, described Ukyo.Loan as “a personal loan” and “for private investment purposes.”

During the summer of 2013, one or more individuals (the so-called “Hackers”) exploited a weakness in the BitFunder programming code to cause BitFunder to credit the Hackers with profits they did not, in fact, earn. As a result, the Hackers were able to wrongfully withdraw from WeExchange approximately 6,000 bitcoins, with the majority of those coins being wrongfully withdrawn between July 28, 2013, and July 31, 2013. Due to this “exploit”, BitFunder and WeExchange lacked the bitcoins necessary to cover what Montroll owed to users.

Montroll did not disclose what happened to users of BitFunder and WeExchange, or investors in Ukyo.Loan. Instead, he continued to promote and sell Ukyo.Loan to customers and, on at least one occasion, falsely represented to customers that BitFunder was commercially successful. As a result of his omissions and misrepresentations, the defendant raised approximately 978 bitcoins through Ukyo.Loan after his discovery of the Hackers’ actions.

In July this year, Montroll pleaded guilty to securities fraud and obstruction of justice.

The case is captioned USA v. Montroll (1:18-cr-00520).

“My dad likes to do magic for us” – kid writes to Court about his father accused of Bitcoin fraud (December 28, 2018) - https://financefeeds.com/dad-likes-magic-us-kid-writes-court-father-accused-bitcoin-fraud/

“My dad likes to do magic for us and other kids. This is the closest way I imagine my dad to lie” – says the son of Jon Montroll, accused of Bitcoin fraud.

All stories, including stories about fraud, have at least two sides. The FinanceFeeds team has been keeping an eye on cryptocurrency fraud cases and has been trying to provide as much detail as possible on some of the major enforcement actions in this respect. Nevertheless, FinanceFeeds’ managing editor has to admit that now and then, it is worth reminding ourselves that all those fraudsters and scammers are human beings too. This has been shown by the sentencing submission filed earlier this week by Jon Montroll, accused of Bitcoin fraud.

The defendant pleaded guilty to securities fraud and obstruction of justice in July this year. As the Court will soon decide on his penalty (he faces a substantial prison term), the defense seeks that the Court sentence Montroll to a period of probation together with conditions of home detention and community service to be determined by the Court.

The sentencing submission includes details about the legal grounds for the defense pushing for such a penalty. The document also includes dozens of letters from Montroll’s friends and community members speaking in his favor.

Montroll is a father to four children, ages to 8 through 12. Although Montroll did not ask for his children to write any letters, one of his sons did so. Below is an excerpt of this letter (the rest contains personal information which FinanceFeeds’ managing editor believes does not need to be disclosed).

“Dear Judge,

I heard my dad asking friends for letters that describe him. I wanted to write a letter too.

Dad told me he made the biggest mistake of his life years ago and now he has to be punished for it and said that we should learn from his mistakes and to not make them and to sure to always be honest. My dad likes to do magic for us and other kids. This is the closest way I imagine my dad to lie. He always shows us how tricks work so I am not sure that counts.

Dad is a kind forgiving father is always very cheerful and fun to be around. He plays games with us. He has taught valuable life lessons like don’t do drugs and don’t smoke. He shows us old and new moves and we always have the best Birthday and Christmas is incredible when things are sad…”

Back to adult reality, let’s note that the counts to which Montroll pleaded guilty and for which he has accepted responsibility are both Class C felonies. The rules provide for maximum term of imprisonment of 20 years. However, the defense notes that a probationary sentence of between one and five years is available.

[burnside]

Thank you for posting the articles.  I've been watching this quietly for a while.  I always saw Ukyo as a highly respected competitor of BTC Trading Corp and it has been sad to see things how things have developed over the years.

Back to adult reality, let’s note that the counts to which Montroll pleaded guilty and for which he has accepted responsibility are both Class C felonies. The rules provide for maximum term of imprisonment of 20 years. However, the defense notes that a probationary sentence of between one and five years is available.

Taking out other people's money for personal expenses is a big deal.

Not disclosing the theft and operating a fractional reserve exchange without transparency is a big deal.  He tricked every single person that deposited after the theft into thinking they were safe.

Compounding it by announcing a loan and accepting investment without disclosure to investors that they are buying into a 6,000 BTC hole is a big deal.


Even with all that, it seems crazy that you'd put a non-violent person in federal prison for 20 years.

The guy has proven tech skills. Order him to pay it back. Let him work and garnish his pay. Put him on probation until every victim is made whole.

Unless you really think he's rotten to the core don't let those 4 kids grow up without a father. Hating the world, hating the government, and hating their dad. You create 4 more victims, an additional burden on taxpayers, and how will he ever repay anyone from prison?

If he fails to keep a job, fails to make payment progress, goes out defrauding people again, or fails to care for his family - then you can wack him with a parole violation and then prison becomes an option.

My $0.02.

[SebastianJu]

Even with all that, it seems crazy that you'd put a non-violent person in federal prison for 20 years.

The guy has proven tech skills. Order him to pay it back. Let him work and garnish his pay. Put him on probation until every victim is made whole.

Unless you really think he's rotten to the core don't let those 4 kids grow up without a father. Hating the world, hating the government, and hating their dad. You create 4 more victims, an additional burden on taxpayers, and how will he ever repay anyone from prison?

If he fails to keep a job, fails to make payment progress, goes out defrauding people again, or fails to care for his family - then you can wack him with a parole violation and then prison becomes an option.

My $0.02.

I agree on that. Let him work. However, I'm not really sure if the victims are topic at all at the moment. Do they search for the hacker or don't they care about that at all? I mean all punishment is only some formal thing.

Also in another article I have read about SEC demanding nearly 3 years of imprisonment for lying to them. So is this the second felony?

Also I'm surprised about not knowing that he did not only fake documents he showed the SEC, but also had some problems before. I don't care about a small, stupid copyright infringement, but stealing and tax evasion was new to me till yesterday when I read this article: https://btcmanager.com/founder-bitfunder-jon-montroll-no-stranger-legal-system/?q=/founder-bitfunder-jon-montroll-no-stranger-legal-system/

A hymnbook of legal wrangles accompanies Jon E. Montroll. As early as 1998 he was arrested for stealing electronics from Fry’s computer store in Arlington, Texas.

At the time, he was also guilty of tax evasion, with the County Clerk’s Office in Wilbarger County, Texas, holding a judgment worth $251,546.32 for unpaid taxes against Montroll, a listed defendant in that case. It remains unclear whether the amount was settled with the IRS or whether Montroll remains a fugitive of that judgment.

OmniAmerican Bank successfully obtained a judgment against Montroll and another of his companies, ColoGuys for $36,979.72 in 2010. Whether this contractual debt was ever settled also remains unclear.

The subsequent suing of Montroll for violation of personal rights around the sex tape hosted by Montroll’s ColoGuys illuminated Montroll’s disregard for intellectual property and willingness to illegally smooth things over when he felt it necessary.

Carolyn Murphy, once a Sports Illustrated’s swimsuit model, sued Montroll for his eventual exposure of her sex tape, while the Arizona outfit ICG holds the copyright to the material, an operator of several popular adult websites obtained the rights in 2006.

An excerpt from the tape had been available for free download on a site hosted on servers run by ColoGuys and subsequently Montroll. In spite of a lawyer’s letter demanding the excerpt be taken down, Montroll declined, resulting in ICG eventually suing.

Well, I think he really got hacked but those things somewhat let me doubt it. I mean back then getting hacked with magic internet money, sure, bad decisions easily could happen. Exchanges didn't announce it freely back then. And the total inexperience in these legal areas, well, I can see how it happened, even though I lost my coins because of that. But stealing electronics? And unpaid taxes worth a quarter million? Why?

Does someone here know his actual lawyer? And are there ongoing lawsuits to recover funds from ukyo? Didn't read from one. And is there an ongoing official investigation targetted at the hacker?

[burnside]

Well, I think he really got hacked but those things somewhat let me doubt it. I mean back then getting hacked with magic internet money, sure, bad decisions easily could happen. Exchanges didn't announce it freely back then. And the total inexperience in these legal areas, well, I can see how it happened, even though I lost my coins because of that. But stealing electronics? And unpaid taxes worth a quarter million? Why?

Does someone here know his actual lawyer? And are there ongoing lawsuits to recover funds from ukyo? Didn't read from one. And is there an ongoing official investigation targetted at the hacker?

Yeah, the track record doesn't help.  Without public disclosure, a police report, telling the community the addresses involved, etc you pretty much have to put the responsibility for repayment on him.

With the unpaid taxes, unfortunately things like that happen easily if you don't plan ahead and have an accountant or someone who understands taxes to guide you.  Happens a lot to people running small businesses.  Can't really afford good advice, but can't afford not to either.

Not making up excuses for Jon, but the full list clearly shows that he's not a violent offender and probationary oversight is probably sufficient.

[statdude]

Yeah, the track record doesn't help.  Without public disclosure, a police report, telling the community the addresses involved, etc you pretty much have to put the responsibility for repayment on him.

With the unpaid taxes, unfortunately things like that happen easily if you don't plan ahead and have an accountant or someone who understands taxes to guide you.  Happens a lot to people running small businesses.  Can't really afford good advice, but can't afford not to either.

Not making up excuses for Jon, but the full list clearly shows that he's not a violent offender and probationary oversight is probably sufficient.

As someone who lost bitcoin to Jon / Bitfunder, I disagree.

Separately, is there any way for retail investors "recover" funds in an SEC fraud case? or does the SEC just get to keep any settlement to themselves, leaving investors high and dry? I'm sure theres a precedent from the hundreds of scams prosecuted yearly.

[burnside]

As someone who lost bitcoin to Jon / Bitfunder, I disagree.

Separately, is there any way for retail investors "recover" funds in an SEC fraud case? or does the SEC just get to keep any settlement to themselves, leaving investors high and dry? I'm sure theres a precedent from the hundreds of scams prosecuted yearly.

The SEC fines I'm pretty sure just go to fund their next investigation.

You can hire a lawyer and file a suit. Honestly surprised it hasn't happened already.

[SebastianJu]

That's what I wonder. Didn't it really happen at all? Who did he spoke about when he asked the judge to postpone his sentence because he wants to create some money to reimburse some party. However, I don't have a clue about who he spoke about. I thought maybe there is a lawsuit already.

Also the theft, not sure how old he was at that year, might be some stupid teenage thing, nothing letting judge over to his actual self, maybe.

[OgNasty]

As someone who lost bitcoin to Jon / Bitfunder, I disagree.

Separately, is there any way for retail investors "recover" funds in an SEC fraud case? or does the SEC just get to keep any settlement to themselves, leaving investors high and dry? I'm sure theres a precedent from the hundreds of scams prosecuted yearly.

The SEC fines I'm pretty sure just go to fund their next investigation.

You can hire a lawyer and file a suit. Honestly surprised it hasn't happened already.

Ya, look what Uncle Sam did to BFL. Shut them down so they couldn’t even ship products to waiting customers, effectively bankrupting them, then seized what they could for themselves, leaving nothing for the burned customers and in fact actually making it worse for everyone involved.

That’s what government does. Waste everyone’s time, send people to jail, fine them, and then give the middle finger to scammed customers while taking any recovered money for themselves. Once upon a time there were people who believed Bitcoin could end practices like this, but now we seem more concerned with getting it in our government controlled retirement accounts... You can’t make this stuff up people.

[burnside]

That's what I wonder. Didn't it really happen at all? Who did he spoke about when he asked the judge to postpone his sentence because he wants to create some money to reimburse some party. However, I don't have a clue about who he spoke about. I thought maybe there is a lawsuit already.

Also the theft, not sure how old he was at that year, might be some stupid teenage thing, nothing letting judge over to his actual self, maybe.

Hard to say.  The fact there isn't more out there about it and efforts to trace the funds makes it suspect no doubt.

Ya, look what Uncle Sam did to BFL. Shut them down so they couldn’t even ship products to waiting customers, effectively bankrupting them, then seized what they could for themselves, leaving nothing for the burned customers and in fact actually making it worse for everyone involved.

That’s what government does. Waste everyone’s time, send people to jail, fine them, and then give the middle finger to scammed customers while taking any recovered money for themselves. Once upon a time there were people who believed Bitcoin could end practices like this, but now we seem more concerned with getting it in our government controlled retirement accounts... You can’t make this stuff up people.

BS for sure that all the fines/seizures are not pooled for the victims.  I'd like to know where all my LTC went after the BTC-e seizure.  Why wasn't a recovery website setup and funds distributed if they had the db and everything they needed right there?

[pascal257]

Are there any updates on this?

Edit: Some more info, e.g. regarding the court case here: https://bitcointalk.org/index.php?topic=337523.680

The guy has proven tech skills. Order him to pay it back. Let him work and garnish his pay. Put him on probation until every victim is made whole.

Unless you really think he's rotten to the core don't let those 4 kids grow up without a father. Hating the world, hating the government, and hating their dad. You create 4 more victims, an additional burden on taxpayers, and how will he ever repay anyone from prison?

If he fails to keep a job, fails to make payment progress, goes out defrauding people again, or fails to care for his family - then you can wack him with a parole violation and then prison becomes an option.

My $0.02.

I would assume that in his lifetime he will not be able to pay back what he owes.

[arewethereyet?]

https://www.coindesk.com/ceo-of-bitfunder-exchange-gets-14-months-in-prison-for-fraud-obstruction

[DebitMe]

Posting to come back and read later, but does anyone have a way to verify their lost funds from this? I know I lost some to this scam, but cannot remember how much it was.  Although a quick skim through makes it seem like all is lost anyhow, still would like to know.

[arewethereyet?]

Posting to come back and read later, but does anyone have a way to verify their lost funds from this? I know I lost some to this scam, but cannot remember how much it was.  Although a quick skim through makes it seem like all is lost anyhow, still would like to know.

Brewster would have good details of that, i would have thought....and would be a good witness, in the event recovery proceedings went to court.

[DebitMe]

Posting to come back and read later, but does anyone have a way to verify their lost funds from this? I know I lost some to this scam, but cannot remember how much it was.  Although a quick skim through makes it seem like all is lost anyhow, still would like to know.

Brewster would have good details of that, i would have thought....and would be a good witness, in the event recovery proceedings went to court.

What is his involvement? Was he apart of it or someone who investigated or wuat?

[arewethereyet?]

Posting to come back and read later, but does anyone have a way to verify their lost funds from this? I know I lost some to this scam, but cannot remember how much it was.  Although a quick skim through makes it seem like all is lost anyhow, still would like to know.

Brewster would have good details of that, i would have thought....and would be a good witness, in the event recovery proceedings went to court.

What is his involvement? Was he apart of it or someone who investigated or wuat?

Danny Brewster was CEO of NEOBEE. He offered and gave Jon a loan. Thats what the 4% payment we got was about. Danny would have seen and hopefully kept some records of what he saw, or found out. Unless Jon gave him a file of bullshit anyway....