New witness delays trial over bitcoin exchange tied to JPMorgan hack

NEW YORK (Reuters) - The trial of two men was delayed on Monday in a case stemming from a probe into a bitcoin exchange and a data breach at JPMorgan Chase & Co after prosecutors revealed a new witness.

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Jury selection was set to begin in Manhattan federal court in the case of Yuri Lebedev, whom authorities call the architect of bitcoin exchange’s platform, and Trevon Gross, a pastor and ex-chairman of a now-defunct credit union.

But U.S. District Judge Alison Nathan delayed jury selection until Tuesday after prosecutors said they had secured a new witness.

The witness, Philip Burgess, was represented by the law firm of one of Gross’ lawyers in an unrelated tax case in which he was sentenced in 2010 to eight months in prison.

Assistant U.S. Attorney Daniel Noble said Burgess, while “reporting another potential fraud” to prosecutors on Wednesday, revealed he had incriminating information stemming from his time as a potential investor in the credit union Gross headed.

But after spending the day discussing how to resolve the conflict of Gross and Burgess sharing the same law firm, Nathan ruled prosecutors could not call their eve-of-trial new witness.

“It is my conclusion that we will proceed tomorrow and the government may not call Mr. Burgess,” she said.

Gross, 52, and Lebedev, 39, are among nine people who have been charged following an investigation connected to a breach JPMorgan disclosed in 2014 that exposed over 83 million accounts.

While Gross and Lebedev were not accused of hacking, they came under scrutiny in connection with, which authorities said was operated by Florida resident Anthony Murgio and owned by an Israeli behind the JPMorgan breach, Gery Shalon.Shalon has pleaded not guilty to charges that he orchestrated cyber attacks that resulted in the theft of over 100 million people’s information.

Prosecutors said operated through a front called “Collectables Club” to trick financial institutions into believing it was a memorabilia club while it converted, with no license, millions of dollars into bitcoin.

To further evade scrutiny, in 2014, Murgio, with Lebedev’s help, tried to take over Helping Other People Excel Federal Credit Union of Jackson, New Jersey, which was linked to HOPE Cathedral.

To do so, they and others paid $150,000 in bribes via the church to Gross, its pastor, in exchange for facilitating Murgio’s takeover and arranging for Lebedev and others to be put on the credit union’s board, prosecutors said.

Federal regulators took the credit union into conservatorship in 2015. Murgio pleaded guilty in January.

Reporting by Nate Raymond in New York; Editing by Cynthia Osterman and Richard Chang