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During the ICO era, Block Bits Fund was created in 2017. The firm promoted itself as a cryptocurrency, Initial Coin Offerings (ICOs), and blockchain technology investment fund. It guaranteed investors a significant return on investment based on the profit it allegedly made by exploiting price differences between digital currencies on various crypto exchanges.
The US Department of Justice (DOJ) has charged Japheth Dillman, 44, the founder of Block Bits Fund, with defrauding investors by convincing them to deposit $960,000 in a fictitious arbitrage autotrader.
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According to the indictment, Dillman and his colleague David Mata, 42, allegedly falsified corporate records to misrepresent Block Bits’ level and capabilities.
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.
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