The US Department of Justice (DOJ) has charged Japheth Dillman, the founder of Block Bits Fund, for misleading traders into committing $960,000 to a fake arbitrage autotrader.
Block Bits Fund was started in 2017 during the ICO period.
Initially, the company was presented as a fund focusing on cryptocurrencies, Initial Coin Offerings (ICOs), and blockchain technology. It promised investors huge gains from the profit it would generate by leveraging price differences between digital currencies on different crypto exchanges.
The charges reveal that Dillman, and his associate David Mata, allegedly falsified the extent and range of operations of Block Bits by forging firm data.
Prosecutors have accused Dillman of lying to traders in June 2017 that the ‘autotrader was already functioning’ and also generating significant income for Block Bits. However, there was no working autotrader at that time, and also claims in revenue are inaccurate.
In August 2017, Dillman emailed traders that the ‘arbitrage autotrader was being assessed and would be launched every week later’, this time too, wrong information was put up.
The complaint further read that both Dillman and Mata told traders that funds have been kept in cold storage for safekeeping to generate greater yields. However, the funds were invested and misplaced in dangerous crypto schemes that had nothing to do with cold storage.
The complaint also disclosed that Block Bits traders misplaced about $508,000 to the scheme.
Both the accused are charged with a count of wire fraud in two separate paperwork. In case of conviction, they might face a maximum sentence of 20 years in jail, a penalty of $250,000, and three years of supervision after release.
Meanwhile, Dillman’s fraud case isn’t the first one. In a similar instance, in February, a federal grand jury in San Diego indicted BitConnect’s founder Satish Kumbhani for allegedly orchestrating and defrauding global investors of a $2.4 billion global Ponzi scheme.
