By Brendan Pierson

NEW YORK, July 23 (Reuters) – The operator of a shuttered
bitcoin-denominated exchange pleaded guilty on Monday to federal
charges that he defrauded investors and lied to U.S. securities
regulators investigating the theft by hackers of virtual
currency now worth about $46 million.

Jon Montroll, 37, pleaded guilty to securities fraud and
obstruction of justice before U.S. Magistrate Judge James Cott
in Manhattan, federal prosecutors said in a statement.

Daniel Levy, a lawyer for Montroll, had no immediate

According to prosecutors, Montroll, of Saginaw, Texas,
operated WeExchange Australia Pty Ltd, which functioned as a
bitcoin depository and exchange service, and,
which allowed users to sell virtual shares of business entities
in exchange for bitcoins.

Prosecutors said that between the launch of Bitfunder in
2012 and at least July 2013, Montroll defrauded investors by
taking WeExchange users’ bitcoins for himself, selling them for
dollars and spending them on personal expenses.

In July 2013, according to prosecutors, Montroll solicited
investments in a security he called Ukyo.Loan, after his
screenname, Ukyo, promising investors that they would earn
interest daily and could redeem their shares at any time.

In 2013, prosecutors said, computer hackers succeeded in
withdrawing about 6,000 bitcoins from WeExchange that they had
not earned, leaving Montroll unable to pay what he owed
Ukyo.Loan investors and users of WeExchange and BitFunder.
Nonetheless, they said, Montroll did not disclose the hack and
continued to solicit investments.

Montroll subsequently came under investigation by the U.S.
Securities and Exchange Commission, and lied to investigators in
sworn interviews in 2013 and 2015 about when he learned of the
hack and about other matters, prosecutors said.
(Reporting by Brendan Pierson in New York; Editing by Tom