The 22-year-old was one of six players arrested and bailed as part of a probe by the National Crime Agency, which was acting on information passed to them by the Sun on Sunday newspaper.
The Latics responded by suspending Montano without pay on Sunday, December 8 and have now confirmed his contract with them has been terminated.
A statement on the Sky Bet League One club's website, issued on their website through CM Solicitors, said: "After a thorough investigation carried out by Oldham Athletic Football Club relating to the conduct of Cristian Montano and following lengthy discussions with our team of legal advisers at CM Solicitors, a decision has been made by the club board to dismiss the player forthwith.
"Notwithstanding and without prejudice to the ongoing criminal investigation, it is our view that the player's conduct, in not only bringing the name of Oldham Athletic but also the football authorities into disrepute, amounts to very serious breaches of club discipline, and therefore constitutes gross misconduct.
"Oldham Athletic take matters such as this extremely seriously and believe it was essential to act as swiftly as possible in conjunction with our legal advisers to investigate and deal with this matter decisively once they became aware of the allegations and irrespective of any other investigations and proceedings by other agencies."