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Bitcoin exchange founder arrested over cryptocurrency fraud

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The founder of Bitcoin exchange, BitFunder, has been arrested in a probe into a huge cryptocurrency heist.

According to Metro UK, Jon Montroll was  accused of lying to American regulators in a bid to avoid taking responsibility a theft in which hackers escaped with a stash of Bitcoin that is now worth almost $70 million.

Federal prosecutors in Manhattan announced the charges against Montroll the same day the U.S. Securities and Exchange Commission filed a lawsuit accusing him and the company of running an unregistered securities exchange that defrauded its users.

Prosecutors said Montroll operated WeExchange Australia, which functioned as a Bitcoin depository and exchange service, and BitFunder.com, which allowed users to sell virtual shares of business entities in exchange for bitcoins.

According to a criminal complaint, hackers in 2013 exploited a weakness in BitFunder’s programming code to cause it to credit them with profits they had not actually earned, allowing them to withdraw 6,000 bitcoins from WeExchange.

Due to the hacking, BitFunder and WeExchange lacked enough bitcoins to cover what Montroll owed users, prosecutors said. Yet they said that during a subsequent SEC probe, Montroll denied that the exploit the hackers used had been successful.

Prosecutors said that he also produced to the SEC a screenshot that falsely represented how many Bitcoins were available to BitFunder users as of October 2013.

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