A federal jury in the U.S. District Court for the Northern District of California in San Francisco convicted Block Bits co-founder Japheth Dillman on five fraud-related counts following a trial regarding a failed cryptocurrency investment pitch.
According to reports from the courtroom, a 12-member jury found Dillman guilty of four counts of wire fraud and one count of conspiracy after roughly six hours of deliberations. Prosecutors demonstrated that Dillman and co-founder David Mata raised approximately $960,000 from about 22 retail investors between June 2017 and August 2018.
The pitch centered around a proprietary automated trading bot that supposedly executed trades across dozens of exchanges to capture price differences. However, prosecutors and the U.S. Securities and Exchange Commission stated the technology did not exist. Instead, actual trading consisted of Mata manually placing trades through an exchange account, while investor capital was directed into risky loans and the AML Bitcoin initial coin offering rather than low-risk cold storage.
Mata previously pleaded guilty to one count of wire fraud in June 2022 and testified against Dillman under a plea agreement. Dillman's defense argued that Dillman relied on information provided by his technical partner regarding the trading operations.
Each wire fraud count carries a statutory maximum of 20 years in prison and a $250,000 fine, with final sentencing guidelines to be determined based on calculations including investor losses. No sentencing date has been set. Additionally, an SEC civil enforcement action against Dillman and the Block Bits entities remains pending, seeking financial penalties, disgorgement, and injunctions.
