The operator of a crypto fund who allegedly misled investors has been convicted on fraud and conspiracy charges by a U.S. jury.
Following a 10-day trial in a federal court in California, the founder and managing director of Block Bits Capital LLC, Japheth Dillman, was convicted of wire fraud and conspiracy to commit wire fraud in connection with a scheme that misled investors with false promises about its ability to generate returns from an automated trading algorithm.
U.S. authorities alleged that between June 2017 and August 2018, Dillman and his co-conspirator, David Mata, raised money from investors amid claims that the firm’s trading system would generate crypto trading profits when they knew that the algorithm didn’t work. Instead, they used investors’ funds to pay themselves and to make speculative trades in other crypto ventures, which resulted in large trading losses.
Dillman, who is currently out on bond, will be sentenced on Dec. 8.
In a parallel proceeding, the U.S. Securities and Exchange Commission (SEC) also charged Dillman, Block Bits and Mata, alleging that they breached securities rules by conducting an unregistered securities offering.
Mata settled the allegations, agreeing to permanent injunctions and to disgorge $86,624, with a civil penalty to be determined at a later date. He also pleaded guilty to a wire fraud charge.
In its proceeding against Dillman and Block Bits, the SEC sought injunctions, disgorgement and civil penalties.