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SEC Charges Former Bitcoin-Denominated Exchange and Operator With Fraud
The Securities and Exchange Commission today charged a former bitcoin-denominated platform and its operator 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.
The SEC alleges that BitFunder and its founder Jon E. Montroll operated BitFunder as an unregistered online securities exchange and 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.
“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. We will continue to focus on these types of platforms to protect investors and ensure compliance with the securities laws,” said Marc Berger, Director of the SEC’s New York Regional Office.
“As alleged in the complaint, Montroll defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on the exchange’s system and the resulting bitcoin theft. We will continue to vigorously police conduct involving distributed ledger technology and ensure that bad actors who commit fraud in this space are held accountable,” said Lara S. Mehraban, Associate Regional Director of the SEC’s New York Regional Office.
The SEC’s complaint, filed in federal district court in Manhattan, 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.
The SEC’s investigation was conducted by Daphna A. Waxman, Daphne Downes, and Valerie A. Szczepanik in the New York Regional Office. Ms. Waxman and Ms. Szczepanik also are members of the SEC’s Distributed Ledger Working Group and the Enforcement Division’s Cyber Unit. The litigation will be led by Dugan Bliss. The case is being supervised by Lara S. Mehraban.
In a parallel criminal case, the U.S. Attorney’s Office for the Southern District of New York today filed a complaint against Montroll for perjury and obstruction of justice during the SEC’s investigation. The SEC appreciates the assistance of the U.S. Attorney’s Office and the Federal Bureau of Investigation.
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London, Downing Street 10, The UK PM Theresa May met PM Mark Rutte of the Netherlands today.
Eurostar: St. Pancras Station
UK Prime Minister Theresa May hosted Prime Minister Mark Rutte of the Netherlands for a working lunch at Downing Street this afternoon.
Mrs. May began by welcoming the new Eurostar route between the UK and the Netherlands, noting that this will bring the two countries who already share close ties, even closer.
She then gave an update on Brexit negotiations with both leaders agreeing on the importance of concluding the terms of the implementation period in March and the terms of the future partnership as soon as possible.
The Prime Minister set out her vision for a bold future economic partnership with the Netherlands and the whole of the EU after the UK leaves, stressing that we should all be optimistic and flexible to achieve a trading relationship which is as frictionless as possible, which Prime Minister Rutte welcomed.
Finally, both leaders discussed the importance of the role that the UK and Dutch forces were both playing in the Baltics and expressed their wish to continue to work closely together on their shared security issues.
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SEC: Statement on Cybersecurity Interpretive Guidance
SEC Chairman Jay Clayton
Feb. 21, 2018
Yesterday, the Commission approved the issuance of an interpretive release to provide guidance to public companies when preparing disclosures about cybersecurity risks and incidents. The release also communicates the Commission’s views on the importance of maintaining comprehensive policies and procedures related to cybersecurity risks and incidents.
In today’s environment, cybersecurity is critical to the operations of companies and our markets. Companies increasingly rely on and are exposed to digital technology as they conduct their business operations and engage with their customers, business partners, and other constituencies. This reliance on and exposure to our digitally-connected world presents ongoing risks and threats of cybersecurity incidents for all companies, including public companies regulated by the Commission. Public companies must stay focused on these issues and take all required action to inform investors about material cybersecurity risks and incidents in a timely fashion.
In 2011, the Division of Corporation Finance issued guidance that provided the Division’s views regarding disclosure obligations that relate to cybersecurity risks and incidents. Yesterday, the Commission voted to provide guidance to public companies that reinforces and expands the Division’s prior guidance. The guidance highlights the disclosure requirements under the federal securities laws that public operating companies must pay particular attention to when considering their disclosure obligations with respect to cybersecurity risks and incidents. It also addresses the importance of policies and procedures related to disclosure controls and procedures, insider trading, and selective disclosures. I believe that providing the Commission’s views on these matters will promote clearer and more robust disclosure by companies about cybersecurity risks and incidents, resulting in more complete information being available to investors. In particular, I urge public companies to examine their controls and procedures, with not only their securities law disclosure obligations in mind, but also reputational considerations around sales of securities by executives.
There is no doubt that the cybersecurity landscape and the risks associated with it continue to evolve. I have asked the Division of Corporation Finance to continue to carefully monitor cybersecurity disclosures as part of their selective filing reviews. We will continue to evaluate developments in this area and consider feedback about whether any further guidance or rules are needed.
I would like to thank the staff for their dedication and thoughtful work on this interpretive release. It reflects input from the Divisions of Corporation Finance, Enforcement, and Economic and Risk Analysis, and the Offices of the General Counsel and Chief Accountant. Specifically, I would like to thank Bill Hinman, David Fredrickson, Jim Daly, Tamara Brightwell, Lilyanna Peyser, Jacqueline Kaufman, Mike Reedich, Bryant Morris, Luna Bloom, Laura Jarsulic, and Joe Brenner. I also want to thank my fellow Commissioners and their staff for their engagement and input on this important issue.