The United States Department of Justice (DOJ) has indicted 44-year-old Japheth Dillman, the founder of Block Bits Fund, for misleading investors into committing a total of $960,000 to a false arbitrage autotrader.
DOJ Indicts Block Bits Founder
Block Bits Fund was founded in 2017 during the ICO era. The company presented itself as a fund dedicated to cryptocurrencies, Initial Coin Offerings (ICOs), and blockchain technology. It promised investors high returns from the profit it supposedly generated by leveraging price discrepancies between digital currencies on different crypto exchanges.
According to the indictment, Dillman, alongside his partner David Mata, 42, allegedly misrepresented the level and capability of Block Bits by falsifying company records.
Prosecutors alleged that Dillman lied to investors in June 2017 that the autotrader was already in operation, generating substantial profits for Block Bits. However, there was no working autotrader at the time, and claims about the profit were false.
Block Bits Investors Lost Over $500,000
In August 2017, Dillman emailed investors that the arbitrage autotrader was being tested and would be launched a week later, but again, the information provided was false.
The complaint further alleged that the partners forged records regarding the management of investors’ funds. Dillman and Mata told investors that funds were placed in cold storage for safekeeping to generate higher yields. However, the funds were invested and lost in risky cryptocurrency projects that had nothing to do with cold storage. The indictment also revealed that Block Bits investors lost about $508,000 to the scheme.
Both partners are charged with one count of wire fraud in two separate documents. If convicted after their next court appearance, they would face a maximum sentence of 20 years in prison, a fine of $250,000, and three years of supervision after release.
Not the First
Meanwhile, Dillman is not the first to face charges from US prosecutors for operating a fraudulent crypto scheme.
CryptoPotato reported in February that the DOJ officially indicted one of BitConnect’s founders on fraud charges in connection to a Ponzi scheme that drained nearly $2.4 billion from investors in 2018.
Featured Image Courtesy of WTOP