A federal jury has convicted Japheth Dillman, a 48-year-old San Francisco resident and co-founder of Block Bits Capital, on charges of wire fraud and conspiracy to commit wire fraud in connection with a fraudulent cryptocurrency trading fund. The U.S. Department of Justice announced the verdict Monday after a 10-day trial before U.S. District Judge Richard Seeborg in the Northern District of California.
According to court documents and evidence, Dillman and a co-conspirator defrauded more than 20 investors of nearly $1 million between June 2017 and August 2018. Investors were told the fund used an automated crypto trading tool called the "Autotrader" that could execute arbitrage across multiple exchanges, but Dillman knew the algorithm was not functional. The SEC's 2022 civil complaint added that Block Bits never completed the trading bot and that manual trading was used instead.
Prosecutors said investor funds were used to pay Dillman and his co-conspirator and to make risky investments in other crypto ventures that produced significant losses. Despite the losses, Dillman falsely reported that the fund was generating substantial profits. He faces up to 20 years in prison and a $250,000 fine for each count, with sentencing scheduled for December 8. He remains free on bond. The FBI and IRS Criminal Investigation were involved in the case, with assistance from the SEC's San Francisco Regional Office.
