Even before being hit with a federal securities fraud lawsuit by the SEC and independent perjury charges by the Justice Department last month, the founder of a now-defunct cryptocurrency exchange had left a trail of lawsuits, legal judgments and a lawyer who says she never got paid by him.
Jon Montroll, 37, was accused on Feb. 21 in a civil complaint by the Securities and Exchange Commission of running his cryptocurrency site BitFunder as an "unregistered securities exchange" and of defrauding users.
Montroll also was arrested on separate charges of perjury and obstruction of justice lodged by the U.S. Attorney for the Southern District of New York on Feb. 21. The prosecutor said Montroll gave false testimony and false documentation during the SEC investigation into BitFunder.
The SEC complaint said the Saginaw, Texas, resident failed to disclose a cyberattack on his exchange's system and a bitcoin theft that followed that hack. In 2013, hackers were able to withdraw from about 6,000 bitcoins from BitFunder, the SEC said, worth about $775,000 at the time. As of Monday, those bitcoins were worth roughly $68.7 million.
After the theft, Montroll transferred some of his own bitcoin holdings to conceal the losses, according to the DOJ's complaint.
The cases are pending, and Montroll is scheduled to appear in Manhattan federal court on Wednesday in the DOJ case.
A review of Montroll's background revealed that this is just his latest legal tussle.
Montroll was arrested in 1998 for allegedly stealing electronics from computer hardware store Fry's, in Arlington, Texas, police told CNBC. Police could not say how the 1998 case was resolved because records are no longer available. His legal trouble continued from there.
At the time of his arrest, the County Clerk's Office in Wilbarger County, Texas, had a judgment in the amount of $251,546.32 for unpaid taxes on the property occupied by Vista Living, a business in Vernon, Texas, that Montroll's family owns. The country tax collector's office confirmed to CNBC the judgment, which named Montroll and properties in Vernon.
A Vista Living employee told CNBC that Montroll's family, who are originally from Vernon, had owned Vista Living for years.
In addition to the for-profit nursing home, Montroll owns an internet server hosting and collocation business called ColoGuys Inc.
In 2010, OmniAmerican Bank obtained a judgment against Montroll and ColoGuys for $36,979.72, with another $1,500 awarded to the bank in attorney's fees. Online records show the matter involved a debt from a contract.
A lawyer who represented OmniAmerican Bank in the case told CNBC he did not recall details.
Michael Lehmann, a federal public defender who is representing Montroll in the SEC case, did not respond to CNBC's requests for comment on the current charges or past legal issues.
Separately, Montroll and ColoGuys were previously sued in a copyright case alleging that a homemade sex tape was posted on a website hosted by a ColoGuys server without the copyright holder's consent.
According to the lawsuit, the tape featured a model named Carolyn Murphy, who once appeared on the cover of Sports Illustrated's swimsuit edition. The copyright to the tape was acquired in 2006 by the Arizona company ICG, which operates several adult-oriented websites including www.HollywoodSexTapes.com, according to the filing.
But in 2006, before the Murphy video was published or released for public sale, ICG alleged that it had discovered that another web site, www.BeerAndShots.com, had published a three-minute excerpt and allowed it to be downloaded for free via its website, according to a court document.
BeerAndShots was owned by another man, the complaint said, but his site was allegedly hosted on servers owned by Montroll's ColoGuys.
The lawsuit said even after a lawyer for ICG sent BeerAndShot's owner and ColoGuys a letter demanding they remove the copyrighted video, the video remained on the site. ICG later sued.
Montroll's lawyer in the case, Jill Ormond, ended up asking the judge for permission to withdraw as his attorney, citing a series of problems she had encountered with her client.
"Mr. Montroll signed a fee agreement, promising to pay a retainer and his bills," Ormond's motion to withdraw said. "The undersigned counsel has personally reached Mr. Montroll twice by telephone. On the first call I told Mr. Montroll of the upcoming discovery deadlines and his past due balances."
Reached by phone, Ormond said Montroll "just disappeared." Her motion was granted and she withdrew from the case. She added that she doesn't recall him paying but that the case was so long ago it was probably written off by now. He does not currently owe her money.
"It's clear from what they filed that they withdrew, and that he didn't pay them," said David Gingras, copyright and internet law attorney based in Phoenix about Ormond's motion to withdraw. Gingras represented the internet company that owned Hollywoodsextapes.com.
Gringas said his client decided not to pursue the case further, and dropped the claims.
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