Block Bits Capital Co-Founder Convicted in Nearly $1 Million Crypto Fraud
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A federal jury convicted Block Bits Capital co-founder Japheth Dillman of wire fraud and conspiracy after prosecutors said more than 20 investors lost nearly $1 million to a fraudulent crypto trading fund promoted from June 2017 to August 2018, with evidence the advertised Autotrader automated trading algorithm did not work and investor funds were diverted to personal payments and speculative crypto investments. Dillman, free on bond and facing sentencing on Dec. 8, could receive up to 20 years in prison and fines up to $250,000 per count, and the verdict underscores a DOJ and SEC crackdown on crypto investment fraud and large forfeiture efforts that have sought $25 million and helped seize over $800 million in assets.
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A federal jury has convicted Block Bits Capital co-founder Japheth Dillman of wire fraud and conspiracy after prosecutors said more than 20 investors lost nearly $1 million in a fraudulent cryptocurrency trading fund, crypto.news reported, citing the Department of Justice.
The scheme
The 48-year-old San Francisco resident was found guilty following a 10-day trial before U.S. District Judge Richard Seeborg in the Northern District of California. Evidence showed Dillman helped raise money for Block Bits Capital between June 2017 and August 2018 while promoting an automated trading program called the “Autotrader” as a completed, functioning product. Prosecutors said Dillman knew the algorithm did not work as represented, so investor money could not be deployed through the advertised strategy.
Where the money went
Instead, investor funds were diverted to personal payments and speculative cryptocurrency investments that produced substantial losses, while Dillman falsely told investors the fund’s trading operations were generating significant profits. A 2022 SEC civil complaint against Block Bits and co-founder David Mata alleged the trading bot was never completed, that only early development work had been funded, and that trading was carried out manually rather than automatically.
Sentencing and context
Dillman remains free on bond and is scheduled to be sentenced on Dec. 8. He faces a maximum of 20 years in prison and a fine of up to $250,000 for each count of conviction under the wire fraud and conspiracy statutes. The case is part of a broader federal push against crypto investment businesses accused of overstating returns or misusing customer money, following charges over an alleged $1.9 million scheme at Star Credit Holdings and a guilty plea from the CEO of Goliath Ventures over a fraud tied to at least $400 million in investor transfers. Federal authorities have also sought forfeiture of $25 million in cryptocurrency recovered through five investigations, with assets seized through the Justice Department’s Scam Center Strike Force surpassing $800 million. The jury’s verdict followed testimony about the fund’s operations and the marketing of its automated trading software.
For retail investors, the case is a reminder of how investors can evaluate a crypto platform’s safety before committing funds.
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