Jon Montrol, the operator of defunct bitcoin-denominated trading platform BitFunder and WeExchange deposit service, was sentenced for securities fraud and obstruction of justice, according to a statement from the Southern District of New York.

Montrol, of Saginaw, Texas, also known as Ukyo, will serve 14 months in prison for defrauding investors of his “Ukyo.Loan” scheme, transferring funds without investor’s knowledge or consent, and lying to Federal Bureau of Investigation (FBI) and Securities Exchange Commission (SEC) agents during their investigation.

In July 2018, Montrol pleaded guilty for such activities. Manhattan U.S. Attorney Geoffrey S. Berman said:

“Jon Montroll lied to his investors and, after his lies caught the attention of the SEC, lied to them, too. The sentence he received serves as a reminder that this Office will not overlook those who violate their obligation to be honest with investors and the regulators working to protect them.”

In July 2013, BitFunder’s software was said to be hacked, enabling the theft of 6,000 bitcoin from Montrol’s companion fiat-to-crypto platform, WeExchange.

Per the DOJ’s statement, Montrol allegedly failed to communicate the lost monies with investors or regulatory authorities. On one occasion, he promoted the operation as “commercially successful” instead of insolvent. Montrol repeated similar claims to the FBI and “provided the SEC with a falsified screenshot” of investor’s holdings as they began to investigate the exploit.

Montrol’s deception continued on the stand where he provided “materially false and misleading answers” regarding his businesses and the hack.

Additionally, during the investigation it was found Montrol used WeExchange as a personal bank. The attorney’s office wrote at the time:

“Montrol exchanged numerous bitcoins taken from WeExchange into United States dollars, then spent those funds on personal expenses, such as travel and groceries.”

Similarly, shortly before BitFunder shuttered, Montrol began offering a new product, Ukyo.Loan, described as a “round-about investment.” Attorneys also noted that Montrol referred to the investments as “a personal loan.”

Despite his businesses’ insolvency, Montrol continued to advertise Ukyo.Loans netting him 978 bitcoin.

Montrol was also ordered to three years of supervised release and to pay a $167,480 forfeiture.

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Binance, the world’s top exchange by trading volume, says it has completed the eight quarterly “burn” of Binance coin (BNB) tokens.

The exchange posted Friday that the burn – the industry term for destroying tokens – comes in accordance with its white paper and involved 808,888 BNB previously allocated to the Binance team.

The amount was worth around $23.8 million, Binance said, though CoinDesk found the total higher at $26.4 million at time of writing. At press time, BNB was worth almost $32, up 5.95 percent over 24 hours, according to CoinMarketCap.

The burn transaction can be seen here and in the image below.

“Starting with this burn, Binance will relinquish the BNB tokens allocated to the Binance team and contribute this BNB towards our commitment to burning a total of 100 million BNB,” said the exchange.

Binance indicated that the team’s 80,000,000 BNB allocated tokens make up 40 percent of the total BNB supply.

In a blog post on the burn, the firm said the tokens had been allocated to “reward to the work they have put into building the Binance ecosystem.”

“The eventual total supply of BNB will still be 100,000,000 BNB. The current total supply of BNB is 189,000,000 BNB, which means that 89,000,000 BNB still need to be burned,” said the firm, adding:

“The team will burn off the 80,000,000 BNB team allocation first, and the remaining 9,000,000 BNB will be burned by Binance.com exchange.”

CoinDesk reached out to ask if the team will in some way compensated for relinquishing the millions in BNB.

Binance CEO Changpeng “CZ” Zhao said:

“Binance still earns revenues and is a profitable organization. They get paid in BNB, little by little.”

CZ image courtesy of Binance

The U.S. Internal Revenue Service (IRS) may consider subpoenaing major tech companies like Apple, Google and Microsoft in search of taxpayers’ unreported cryptocurrency holdings.

That’s according to a slide deck presentation from an IRS cyber training session, which details a number of ways the agency’s criminal investigators might find potential crypto tax cheats.

“Issuance of a Grand Jury Subpoena should be considered for Apple, Google, and Microsoft for the Subject’s complete application download history,” says the slide deck prepared by James Daniels, the program manager for cyber crimes at the IRS’ criminal investigation unit.

“Each application’s function should be explored to determine whether or not the application can transmit, or otherwise allow, transactions in bitcoin,” Daniels wrote. If so, it should be checked whether the app allows only peer-to-peer transactions, or also transactions with crypto-related businesses.

The deck was leaked on Twitter this week by a certified public accountant (CPA) named Laura Walter. The IRS confirmed to CoinDesk that the slides were genuine.

Justin Cole, director of communication and education at IRS’ criminal investigation unit, said the materials were presented to agency staff at an event at the World Bank in Washington, D.C., on June 5-7.

“The training material has been used around the world to various law enforcement partner audiences and was again given at this forum in a room that included partners from dozens of countries around the world as well as various press members,” Cole wrote in an email.

He would not say whether the IRS will definitely implement the suggested measures. “I can’t discuss specific investigative actions that the agency may or may not take in the future,” Cole said.

Daniels’ presentation also suggested that the IRS request information from “those who know the financial habits of the Subject, including, but not limited to, bank tellers, family and friends of the Subject (if feasible), and establishments the Subject frequents that may accept bitcoins.”

Social media accounts, such as Facebook and Twitter, also should be searched for public mentions of crypto-related information, as well as vendors that accept bitcoin, the deck says.

“A Grand Jury Subpoena should also be considered for (and may already have been obtained during the normal course of the investigation) the Subject’s financial accounts, including, but not limited to, the Subject’s bank, credit card, and PayPal records,” the document goes on, for the further analysis of transactions.

If it becomes clear that the subject of an investigation owns bitcoin, all wallet addresses and balances should be identified, Daniels wrote.

If they use an exchange or online wallet service these companies can be subpoenaed for the user’s balance, addresses, and “any identifying information,” including “any linked financial accounts, login times and information, correspondence, and transaction details,” the slide deck says.

However, the reliability of this approach “has yet to be extensively tested,” Daniels acknowledged. “As such, it may not be advised to send a Subpoena for records if not critically necessary.”

The taxpayers under investigation themselves shouldn’t be sent subpoenas, as this “may be detrimental to the seizure of any bitcoin balance.”

The IRS’s subpoena power applies in civil cases as well as criminal ones, noted Lisa Zarlenga, a partner at the law firm of Steptoe & Johnson. “While this presentation was given by the criminal investigation unit and clearly indicates that criminal investigation will use that tool, there is nothing preventing the civil side from using it as well,” she said.

However, Zarlenga pointed out, the IRS is required to notify taxpayers before it subpoenas third parties, so people will likely know if the tax agency is looking for their bitcoin.

The IRS is getting ready to issue new guidance on reporting crypto for tax purposes, the first to come out since an initial notice published in 2014. A number of questions on how exactly crypto should be taxed have come up since then, often with multiple possible ways to tackle them.

IRS slideshow by CoinDesk on Scribd

IRS image via Shutterstock 

Institutional digital assets platform trueDigital Holdings has announced plans to offer bitcoin derivatives for U.S. investors.

In a press release on Friday, the company said it’s reached an “agreement in principle” to acquire designated contract market (DCM) and swaps execution facility (SEF) registrations with the U.S. Commodity Futures Trading Commission (CFTC) from a firm called trueEX.

The deal is pending approval from the CFTC, the firm said.

If the bid is successful, the aim is to launch a “fully-regulated” cryptocurrency derivatives exchange that would list trueDigital’s bitcoin physically deliverable swaps, which the firm states “have been self-certified with the CFTC.”

Going forward, the company plans to add additional crypto derivatives.

TrueDigital CEO Thomas Kim said:

“A trueDigital owned and operated regulated exchange is the natural step in our evolution toward achieving our goals. Adding the exchange to our ecosystem delivers a complete end-to-end offering, currently unavailable today, that encompasses tokenization, payments, market data and settlement for the benefit of our clients and partners.”

With the move, trueDigital would become one of very few entities offering regulated crypto derivatives in the U.S. If the deal goes through, its main rival would be LedgerX, which launched a bitcoin derivative offering in October 2017.

TrueDigital has previously launched an OTC reference rate for bitcoin and ether.

It has also teamed up with Signature Bank to launch a blockchain-based digital payments platform. The effort received approval from the New York State Department of Financial Services to offer services within the state last December.

Wall Street image via Shutterstock

A Finland-based firm offering cryptocurrency brokerage and exchange services has been granted a Payment Institution License (PIL) in the EU.

In an announcement Friday, Prasos Ltd. said that, with the news, it has become only the third crypto firm in Europe to receive the license.

Awarded by the Finnish Financial Supervisory Authority (FSA), the PIL enables Prasos to offer additional fiat currency payment services for users of its Finnish Coinmotion exchange platform and will further allow it to offer fiat payment services in other European Economic Area countries.

The broker acquired Helsinki-based Coinmotion for an undisclosed sum back in 2016. It also operates another exchange called Bittiraha.fi, as well as Bittimaatti, a bitcoin ATM network in Finland.

“The process for acquiring the licence has lasted almost 1.5 years, during which legislation on the EU level has become clearer. We have been developing our business and processes strongly. I am very happy that we have reached this point and received the Payment Institution Licence.”

In the announcement, Prasos said it also plans to register under the FSA as a virtual currency provider in accordance with new Finnish legislation that came into force on May 1, 2019.  

Henry Brade, chairman of the board of directors at Prasos, commented that the company had previously lost several bank accounts “due to the unregulated nature of the whole sector.”

“With this licence we have, as the only cryptocurrency operator in the world, gained a customer fund account from a Finnish credit institution. As a payment institution, we also believe in the possibility of a deeper integration with the banking sector in the future” he said.

Walk signals image via Shutterstock